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Suppose I am providing maintenance services for a period of 3 years for $1,200. In a YouTube lecture by a reputed tutor, I saw the transaction being recorded as:
Dr Cash $1,200
Cr Deferred Income $1,200
and at the end of each year:
Dr Deferred Income $400
Cr Sales $400.
However, shouldn’t we consider whether there is a significant financing component, calculate the present value of the consideration, and then unwind the discount each year?
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