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Microcap & Penny Stocks : ProNetLink..(PNLK)
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To: Keith Sprague who wrote (4782)5/18/1998 9:11:00 AM
From: Tazman  Read Replies (1) of 8242
 
Revenue recognition of PNLK's fees paid upfront would have to be prorated on a monthly basis. The $360 would go into the bank, with $30 being declared as revenue and $330 as a prepaid asset (a liability account). Next month $30 pays down the prepaid asset and goes to the revenue account until all 12 months are used up and the process (hopefully) starts up all over again.

Now, that's how it works in my job, maybe reporting companies can do it different, but I doubt it. Maybe a question for Zag.

BD

P.S. The revenue recognition may be a "negative" thing from the standpoint that we cannot say that PNLK made $14 million in one day, but the fact remains that the money is being received up front which means thay will have tons of capital to build the business (in contrast to waiting by that mailbox every month for that $30 check) and will be able to use it for investing purposes also (which could also be used to buy back shares). Either way, shareholders will benefit in the long run because "Money makes Money."
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