Performance obligation
In accounting, performance obligation means a promise in a contract to transfer a distinct good or service, or a series of substantially the same ones — the unit revenue is recognized by.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 1
Authority
This definition follows ASC 606-10-25-14.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lesson that teaches this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
Performance obligation, in use
Quoted from the document that use the word — what it does to an interface, in the spec's own sentence.
The deferred revenue balance recognizing by future period, by performance obligation.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- deliverable
- line item
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
9Accounting core (GL)
Family specComponents that render the terms it depends on
Little in the catalog names this concept outright, but its definition is built out of others that are named. These render revenue.
10Receivables (AR)
Family spec13Metrics & analysis
Family specTerms this one depends on
Also in Revenue recognition
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Journal entry for deferred revenueWhen an annual contract is invoiced up front, debit Accounts receivable and credit Deferred revenue. As each month of service is delivered, debit Deferred revenue and credit Revenue for that month's share.Entry
- Journal entry for a customer depositWhen a customer pays a deposit, debit Cash and credit Customer deposits. On delivery, debit Customer deposits for the deposit, debit Accounts receivable for the balance, and credit Revenue for the full price.Entry
- Journal entry for a bundled contract under ASC 606For a contract with several promises, debit Accounts receivable and credit Deferred revenue for the price when billed, allocate the price to each performance obligation by relative standalone selling price, and credit Revenue for each part as that promise is satisfied.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.