On this page
A signed contract, an invoice, and a cash receipt may occur on different dates. None of those dates alone determines all revenue from a customer contract. The accounting depends on what the seller promises, the amount it expects to receive, and when it transfers the promised goods or services.
Follow the revenue model
The lessons follow the five-step model in Topic 606 of the Financial Accounting Standards Board's Accounting Standards Codification. Begin by deciding whether the arrangement is within the topic's scope and meets its contract criteria. Then identify the promises accounted for separately as performance obligations.
The amount the seller expects to be entitled to for the promised transfers is the transaction price. Uncertainty and payment terms can affect that amount; the measurement lessons explain how. The allocation lesson assigns the price to the performance obligations, using the applicable requirements.
The timing lessons determine when each performance obligation is satisfied. Revenue follows the transfer of control to the customer, either over time or at a point in time under the relevant criteria. The invoice schedule does not replace that analysis.
Choose additional work for your question
Use the later lessons when a contract changes or another party helps provide the goods or services. Other lessons address entries and explanations of balances in the notes. Those questions use the earlier contract analysis, but each requires its own facts.
Keep revenue separate from collection. A payment can precede performance, and performance can precede payment. When a customer does not pay an amount already owed, the credit-loss question is different from deciding what price the seller agreed to accept.
Check both the calculation and the conclusion
A calculation can allocate a price correctly using an incorrect set of performance obligations. Before relying on the result, check the contract facts and explain why the accounting requirements apply. Keep those reasons beside the entries and calculations so another reader can follow the result.
The module's case combines the contract analysis with later entries and balances. Use the course page to identify assigned lessons; the full module also contains additional practice and more detailed arrangements.
Module outcomes
Decide whether the revenue model applies to a contract and identify the promises that must be accounted for separately.
Determine the transaction price and allocate it to performance obligations, considering uncertainty, noncash payments, financing, and payments to the customer.
Determine when control transfers and explain how contract changes or special arrangements affect the conclusion.
Prepare entries and reconcile contract balances, costs, revenue, and cash across periods, checking the underlying accounting as well as the arithmetic.
Learning sequence
Follow the dependency order, or open the lesson you need.
- Lesson 1Establish scope and the accounting contract
- Lesson 2Map promises before counting performance obligations
- Lesson 3Estimate consideration, then constrain it
- Lesson 4Separate financing and other forms of consideration
- Lesson 5Establish standalone prices and allocate the contract
- Lesson 6Recognize performance over time only after proving the path
- Lesson 7Locate point-in-time control and route special arrangements
- Lesson 8Classify modifications and principal-agent presentation
- Lesson 9Reconcile contract balances, receivables, entries, and costs
- Lesson 10Build the revenue note and a reviewable evidence trail
Capstone and summative assessment
Use the cumulative case first, then test each transfer without exposing answer keys.