Revenue Recognition ASC 606 Explained via Example

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Videos mentioned here:
1) Various ways to analyze financial statements
• How To Analyze Financi...
2) How to develop month-end close checklist
• How To Create Month En...
Chapters:
00:00 Intro
01:04 The Accounting Error
01:21 The Wrong Approach
03:44 The Correct Approach
08:39 Recap
What we cover in this video:
The example we are showing today involves an accounting error in revenue recognition. We will look at how a bad/clueless accountant deals with the situation and then we will see how a good accountant managed the same issue….
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[@deonjaycpa]

Excellent video! As for the close checklist, I’d even say the check for new contracts should be performed throughout the month especially for companies with higher volumes of major contracts. Also need to ensure business unit leaders always send copies of new contracts to accounting once executed. Then, accounting can review throughout the month and maybe have a weekly or monthly meeting to ensure revenue schedules, etc are being set up properly. This way, everything doesn’t pile up during close week.

[@TheFinancialController]

Excellent points made here!

[@RA-kd3ne]

Thanks

[@basheerahmad418]

I love your videos and your way of explaining bill.. thanks from Bangalore, first viewer always

[@larahporter8123]

Hey this was an excellent video with a very comprehensive example. I really enjoyed it. Your a real good teacher.

[@TheFinancialController]

I appreciate that!

[@bfree247365]

Accounting aside, that company needs to be praising their Sales and Marketing department that apparently brought them a pure profit contract because the cost of sales stayed in line with the original revenue figures. 😃 Just having a little fun with ya! Keep up the great work. I do enjoy your videos and content.

[@TheFinancialController]

haha. nice catch. But note that Cost of Sales rose about 5% each month, and revenue should have been recorded monthly as well. Meaning, if revenue is spread out correctly, you'll see that monthly margins look reasonable.

[@920WIZCO]

Been following you since u were under 100k subscribers and have learned so much. Graduating next month with my bachelors in accounting and very excited to see how far i can go in the field! Thanks Bill!

[@TheFinancialController]

Oh I remember you brother. Please keep me updated on your career progress

[@920WIZCO]

@@TheFinancialController I actually have a job offer lined up for a finance analyst role in a few weeks. ( Doing accounting items though) Very nervous for my first day, but there is a team there and I will take really good notes too my first few weeks.

[@rohitvautre3159]

Excellent explanation of ACS 606. It’s really very informative video with practical scenario.

[@basheerahmad418]

Waiting for more videos like this

[@RA-kd3ne]

Today I leaned flux accounting..thanks

[@Maya-ou9hs]

Awesome video! WOW. So easy to understand and funny!:) Thank you for your great work!

[@TheFinancialController]

Thank you! 😃

[@maryadetayo9361]

Hi thanks for this information, very helpful, however, can you help explain how to treat a third party transaction and also how to recognise the revenue from the principal party?

[@mdroshan9612]

Amazing content Bill. I already work as an Accounting analyst. Your videos are helping me understand complicated topics with practical examples. You are literally helping me take my career ahead by helping me build this knowledge base. I rarely ever comment on youtube but i felt obligated to let you know how your effort is helping rookies like me grow in our careers. Thank you !

[@TheFinancialController]

Excellent, I am so happy to hear this!

[@ragnadrabinowitz7629]

reclass to deferred revenue

[@prasanthak3086]

I would like to more example to explain, in nExt videos can you show IT INDUSTRY HOW TO RECOGNISE

[@christianschultz4828]

Would you say there's a financing component to the delayed payment, as well? What would the accounting treatment be, if so? Thank you for this video!

[@TheFinancialController]

Interesting point regarding financing. I will look into it

[@jeffrey4674]

Shouldn't the contract state "monthly delivery" instead of having to confirm with the supply team?

[@TheFinancialController]

It’s a good point.

[@jeremypage6093]

:) I had no idea that both accountants were the same. It must have been the glasses. Thank you Bill, there would be no accountants without a good Bill.

[@PremKumar-ky2ed]

Can you make a video on accounting consulting job including details of salary, job description, work life

[@dannylam9089]

what about the deffered revenue (as a liability)? we should book $6m unbliied as dr and def rev as cr at Jan '24 and when invoice to the customer we dr $1m AR and cr unbilled and $1m dr def rev and cr revenue and also with the cost (10 or 15%)

[@kukuna2012]

Why dont you CR the Accrued Rev. account for the 6M and DR the cash for the same amount when you receive the cash? My argument is that Accrued Rev. is already an AR account, so there is no need to DR to another AR account. thank you!

[@huili6978]

Thanks for the video! One question, how to adjust the closed month’s journals ? Like we found out the problem in June, and we missed accrued revenue from Jan to May? Do we reopen the Jan to May book? Thanks!

[@TheFinancialController]

If you are a small company with a few investors, you might be able to open the books Jan-May. If larger company and frequent reporting, you'd book it all in June and add footnote about the matter to the financials.

[@FahmeDeen313]

please also share excel file for practice in every video.

[@leimengz6438]

Hi! I am wondering any journal entry needed to be recorded by every month 30th? And what journal entries we need to book for the even recoognition of $1m for every month?

[@Makeupaddict026]

Did you figure this out?

[@leimengz6438]

@@Makeupaddict026 nah

[@Roksana0912]

This example is way too easy. Talk about complex things. Discounts, promises that are not $$ specified, hidden promises, warranty, cancellation, subscription. How to be sure what’s delivered and what’s not.