A customer pays a deposit for work scheduled next month. The bank balance rises immediately, but that does not automatically mean the business has earned the full payment as revenue on the same day.
IFRS 15 addresses revenue from customer contracts by considering performance obligations and their satisfaction. The applicable accounting framework and contract terms matter. This general distinction is useful even before an accountant determines the correct treatment for a particular transaction.
Separate three questions
- When did the cash arrive?
- What has the business promised to provide?
- When and how is that promise fulfilled?
A deposit can help fund materials while the business still owes goods, services or a possible refund under the contract. Treating the entire receipt as freely earned profit can hide that remaining obligation.
Keep evidence with the payment
Retain the customer agreement, invoice or receipt, payment date and delivery or service records. Note any cancellation, refund or milestone terms. Those details allow the finance team to connect the cash receipt with what the business has actually done.
As a simplified example, a workshop receives a payment before producing a custom item. The owner should not infer the accounting result merely from the word deposit on the bank transfer. The contract, performance and applicable rules determine the treatment.
Use different reports for different purposes
A cash forecast helps show whether upcoming bills can be paid. A revenue report answers a different question about activity recognised in the accounts. Both can be useful, but substituting one for the other creates confusion.
Ask a qualified accountant about the relevant reporting and tax requirements rather than applying this illustration as a booking instruction. The managerial habit to keep is clear: cash received, work owed and revenue earned belong in related but distinct conversations.