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Dear Sir,
A beauty salon operates packages whereby they offer a course of 3 treatments for a fixed price of £600 (effectively £200 per treatment)
The customer pays upfront for these on day 1 and at the same time undergoes the first treatment
The remaining two treatments will be carried out after 4 week intervals and so the customer will have completed the course after 12 weeks
Am I correct in saying that revenue can only be recognised as when the treatment has been completed?
In other words £200 revenue in month 1
Dr Cash 600
Cr Revenue 200
Cr Deferred Revenue 400and in month 2 and 3
Dr Deferred Revenue 200
Cr Revenue 200Thank you!
Hi,
Yes, that is correct. Revenue from service would be measured once the service has been provided so if we’ve received all of the cash up front then we would need to defer its recognition as revenue, in the way you’ve done above. Good knowledge of DR and CR entries too, top work!
Thanks
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