The situation
The agency has earned ₹9 lakh by March 31. It billed ₹7 lakh and collected ₹5 lakh. Assume collection is probable and the remaining work is outside this contract.
Your task
Separate earned revenue, billed receivables and unbilled revenue.
Reveal step-by-step solution
Set up the problem
Recognize ₹9 lakh earned under the assumptions. Billing and collection affect the asset balances.
Work through the numbers
Billed receivable = ₹7 − ₹5 = ₹2 lakh. Earned but unbilled = ₹9 − ₹7 = ₹2 lakh.
Interpret the result
Revenue is ₹9 lakh and cash received is ₹5 lakh. The remaining ₹4 lakh is split evenly between billed and unbilled balances.
What to remember
Track delivery, unconditional billing rights and cash as three separate events.