How to Recognize Revenue When Make-Up Gas Is Delivered to a Buyer Who Previously Paid Under Take-or-Pay
Releasing deferred take-or-pay revenue to earned revenue when previously paid make-up volumes are physically delivered.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Take-or-Pay Liability (Deferred Revenue) | Liability (-) | 500,000.00 | - |
| Gas Revenue (Make-Up Earned) | Revenue (+) | - | 500,000.00 |
💡 Accountant's Note
When previously deferred take-or-pay revenue is finally earned by delivering the gas, the liability is released to revenue. The make-up period may span several years depending on the gas sales agreement terms.
Practitioner & Systems Framework
💻 ERP Architecture
Track make-up gas entitlements per buyer per contract year in a sub-ledger. When the buyer exercises their make-up right by nominating gas volumes in excess of the MVC, deliver the gas and release the corresponding portion of the deferred revenue liability to earned Gas Revenue. The per-MMBTU value of make-up delivery: use the original take-or-pay price (what the buyer paid), not the current market price — the buyer already paid for this gas at the original contract price.
⚠️ Audit Flags
Make-up delivery reduces the Take-or-Pay Liability — auditors verify the gas delivery against meter tickets confirming the make-up volumes were actually delivered, not just nominated. The make-up price (the price at which the liability is released) must be consistent with the GSA terms — some agreements specify a discounted make-up price if delivered after a specified period. Stale make-up balances (where the make-up period has expired) must be released to income immediately.
📄 Required Documentation
GSA take-or-pay and make-up provisions, buyer make-up nomination, meter tickets confirming delivered volumes, Take-or-Pay Liability sub-ledger showing the reduction, Gas Revenue recognition entry, make-up price calculation, and make-up period expiry tracking.
Automate this entry with the JEH Accounting Suite
Stop doing manual entry. Our VBA-powered ERP automatically generates your ledgers, Trial Balance, and Financial Statements.
No Subscriptions. Own your data.
Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
Related Journal Entries
Oil & Gas
How to Capitalize the Cost of a 3D Seismic Survey as an Exploration and Evaluation Asset Under IFRS 6
Oil & Gas
How to Capitalize Exploratory Drilling Costs as an E&E Asset Pending Reserve Determination
Oil & Gas