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Technology Stocks : RATIONAL SOFTWARE- BUY OR HOLD
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To: Thomas Haegin who wrote (2690)10/19/1998 12:09:00 PM
From: Len White  Read Replies (2) of 3115
 
Your take on the deferred revenue is basically correct, but the key is that payment has to have taken place. If Lockheed simply places an order and waits for delivery, no accounting is done until the order ships.

If they pay in advance, a credit to cash and a debit to Deferred Revenue will be made. When part of the order is shipped, a credit to sales and a debit to Deferred Revenue will be made for the partial shipment.

Credit card orders that could not get filled before the end of the quarter is a typical source of Deferred Revenue. Annual maintenance agreements also fall into this category. Anything of a prepaid nature.
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