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# Revenue contract example

A sample revenue contract is provided as an example to help you understand the calculations that are involved in the Revenue from Prior/Current CL/CA report. The sample reports are calculated for the sample revenue contract based on the steps outlined in Calculation logic for the Jan-2019 and Feb-2019 periods.

The following table shows the details of this sample revenue contract. All the tables in this section are available for download in this spreadsheet.

## Sample revenue contract details

The following table shows the details of this sample revenue contract.

The following table shows the billing information.

The two hardware lines are right to bill transaction lines. The ratable methods for the other two lines are Contract Ratable. The waterfall report for the contractual revenue is shown below:

The waterfall report for the adjustment revenue is as follows:

The RC Rollforward report for Jan-2019 is as follows:

The RC Rollforward report for Feb-2019 is as follows:

The journal entries that are created for the two right-to-bill lines in the Jan-2019 period are as follows:

 Hardware 1 Dr Cr Unbilled AR 8000 Revenue 8000 Account Receivable 4000 Contract Liability 4000 Revenue 4000 Unbilled AR 4000 Contract Liability 4000 Revenue 4000 Hardware 2 Dr Cr Account Receivable 2000 Contract Liability 2000

In the Feb-2019 period, there is no journal entry created for the Hardware 1 line. The journal entries for the Hardware 2 line are as follows:

 Hardware 2 Dr Cr Contract Liability 2000 Revenue 2000 Unbilled AR 2000 Revenue 2000

The Unbill RollForward report in the Jan-2019 period is as follows. The total unbilled billings from the right-to-bill transaction lines (Hardware 1 and Hardware 2) is 4,000. The total unbilled revenue from the right-to-bill transaction lines is 8,000.

The Unbill RollForward report in the Feb-2019 period is as follows. The total unbilled billings from the right-to-bill transaction lines (Hardware 1 and Hardware 2) is 0. The total unbilled revenue from the right-to-bill transaction lines is 2,000.

## Revenue from Prior/Current CL/CA Report in Jan-2019

When the report is run for the Jan-2019 period, the following calculations are completed:

1. Calculate the unbilled AR revenue based on the following formula:

Unbilled AR Revenue = Net Revenue (Waterfall) - Total Release (RC Rollforward)

• Net Revenue (Waterfall) = Contractual Revenue + Adjustment Revenue = 8000-3355 = 4645
• Total Release (RC Rollforward) = 4000-3355 = 645
• Unbilled AR Revenue = 4645-645 = 4000
2. Get the Unbilled AR Billings from right-to-bill transaction lines from the Unbilled Rollforward Report. The Unbilled AR Billings is 4,000 for Jan-2019.
3. Calculate the Net CA/CL Additions.

Net CA/CL Additions = Total Additions (RC Rollforward Report) - Unbilled Billings (Unbill RollForward) = 36,000-4,000 = 32,000

4. Calculate the Net CA/CL Release.

Net CA/CL Release = Total Release (RC Rollforward Report) - Unbilled Billings (Unbill RollForward) = 645-4,000 = -3,355

5. Based on the Net CA/CL Release, Net CA/CL Additions, and Total Begin Balance, bucket the Net CA/CL Release into PP CA/CL balance and then into the CP CA/CL balance.
• PP CA/CL (Beginning Balance) = 0
• Net CA/CL Additions = 32,000
• Net CA/CL Release = -3,355

There is no PP CA/CL balance to satisfy the Net CA/CL Release. The Net CA/CL Additions is positive and the Net CA/CL Release is negative. So all of the Net CA/CL Release (-3,355) will be allocated to CP CA.

The Revenue from Prior/Current CL/CA Report in Jan-2019 is as follows:

## Revenue from Prior/Current CL/CA Report in Feb-2019

When the report is run for the Feb-2019 period, the following calculations are completed:

1. Calculate the unbilled AR revenue based on the following formula:

Unbilled AR Revenue = Net Revenue (Waterfall) - Total Release (RC Rollforward)

• Net Revenue (Waterfall) = Contractual Revenue + Adjustment Revenue = 12673-897 = 11776
• Total Release (RC Rollforward) = 10672-896 = 9776
• Unbilled AR Revenue = 11776-9776=2000
2. Get the Unbilled AR Billings from right-to-bill transaction lines from the Unbilled Rollforward Report. The Unbilled Billings is 0 for Jan-2019.
3. Calculate the Net CA/CL Additions.

Net CA/CL Additions = Total Additions (RC Rollforward Report) - Unbilled Billings (Unbill RollForward) = 0 - 0 = 0

4. Calculate the Net CA/CL Release.

Net CA/CL Release = Total Release (RC Rollforward Report) - Unbilled Billings (Unbill RollForward) = 9,776-4,000 = 9,776

5. Based on the Net CA/CL Release, Net CA/CL Additions, and Total Begin Balance, bucket the Net CA/CL Release into PP CA/CL balance and then into the CP CA/CL balance.
• PP CA/CL (Beginning Balance) = 35,355
• Net CA/CL Additions = 0
• Net CA/CL Release = 9,776

Both PP CA/CL balance and Net CA/CL Release are in the CL position. Net CA/CL Release is less than the PP CA/CL balance. So, all of Net CA/CL Release will be allocated to PP CL.

The Revenue from Prior/Current CL/CA Report in Feb-2019 is as follows: