A SaaS company collects $100 upfront for a 12-month subscription. Compare the three-statement treatment when (a) recognized fully at sale vs (b) deferred and recognized over the period.

Answer

Both: at collection, Cash +$100 on the BS. (a) Recognize all at sale (wrong under ASC 606 for services): Revenue +$100 on IS → NI +$80 (20% tax) → RE +$80 on BS; Cash already +$100, IS records full revenue, no deferred liability.