The most straight-forward scenario in customer invoicing includes the following steps:
In this case, a typical accounting entry for the invoice is as follows:
In other words, we recognize the revenue and record the receivable (from the customer) at the same time. However, there are many situations where this is not possible due to various reasons.
Sometimes, even if we invoice a customer, we cannot recognize the revenue and need to defer (postpone) the revenue recognition. This is known as ...