Record a Contract Liability Release
Calculate and explain the release of a contract liability as service is performed.
A customer pays $96,000 on January 1 for twelve months of support. Support is provided evenly from January through December. Record a contract liability when cash comes before performance, then release revenue as the service obligation is satisfied. Leaving the liability untouched after cash receipt makes revenue too low and the remaining obligation too high. Before January cash received $96k; liability stays $96k through March because no one ran the release schedule. After Monthly revenue $8k; March year-to-date revenue $24k; remaining liability $72k. Step 1 Monthly service revenue = $96,000 / 12 = $8,000. Even service over twelve months supports…
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