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Technology Stocks : Viasoft is an excellent stock, but what about the company?
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To: Roger A. Babb who wrote (130)1/26/1997 12:35:00 AM
From: Philip H. Lee   of 169
 
I think your DSO receivable analysis misses a crucial point: Viasoft has deferred revenues of $20.0 million. biz.yahoo.com.

The accounting entry is to increase (credit) the Deferred Revenue liability account and increase (debit) the Cash or Accounts Receivable asset account. This happens when a contract for future work is paid for in the present. The company hasn't done the actual work yet but received Cash or Accounts Receivable; thus, the liability account called Deferred Revenue is established. Net Income is not affected yet.

When Viasoft actually does the work in the future, the Deferred Revenue account will be decreased (debited) and Revenue account will be increased (credited), and Net Income will be realized.

It's not that Viasoft needs cash since they're collecting late on work already done. Viasoft is receiving compensation in advance.

The accounting can get confusing so I suggest readers ask a knowledgeable source instead of relying on my possibly mistaken opinion.

Philip

Disclaimer: Information submitted for discussion purposes only and not to be construed as investment advice. Invest at your own risk. Information could be wrong and is not guaranteed to be accurate. Do your own research.
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