How to Record Forfeited Deposit Revenue
Records revenue when a customer cancels a contract and the entity is entitled to retain a non-refundable deposit.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Contract Liability | Debit | 500.00 | - |
| Other Revenue - Forfeited Deposits | Credit | - | 500.00 |
💡 Accountant's Note
When the performance obligation will not be satisfied because the customer cancelled, the deferred revenue (contract liability) is recognized as revenue if the deposit is non-refundable.
Practitioner & Systems Framework
💻 ERP Architecture
Manual adjustment or automated cancellation workflow in the CRM/billing system.
⚠️ Audit Flags
High volume of cancellations near period-end used to meet revenue targets.
📄 Required Documentation
Termination notice and the original contract clause regarding non-refundability.
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