In 2017, Executor Co. will record the delivery of goods as Accounts Receivable and Sales Revenue on December 15 and will record the partial payment received as Cash and a deduction from Accounts Receivable.
On October 10, 2017, when Executor Co. enters into the contract with Belisle Inc., there is no immediate entry to be made, since neither the delivery nor payment has occurred yet. However, on December 15, 2017, when the specialty products are delivered, Executor Co. should recognize both revenue and an account receivable. The revenue is recognized because the delivery has occurred, fulfilling Executor's performance obligation under the contract. The entry made at this point would be:
- Debit Accounts Receivable $10,000
- Credit Sales Revenue $10,000
When Belisle Inc. makes a payment of $5,000 upon delivery, Executor Co. records the payment with the following entry:
- Debit Cash $5,000
- Credit Accounts Receivable $5,000
The remaining balance will be recognized when the promissory note is paid on January 15, 2018, which falls outside the scope of 2017 accounting requirements.