Prepaid expense · fictitious
An annual $4,800 insurance policy covers December 1, 2026 through November 30, 2027. With 334 of 365 days remaining at December 31, the illustrative future amount is $4,392.33.
Accounting guide · Cut-off
Deferred revenue and accrued income cut-off: French and US accounting vocabulary
An invoice date is not always the period in which a service is earned or consumed. This guide separates the four common adjustments and shows how calculation assumptions affect a month-end schedule.
The short answer
Cut-off attributes revenue and expenses to the relevant accounting period. Deferred revenue concerns service still to deliver; accrued income concerns earned amounts not yet billed. Prepaid expenses concern future consumption; accrued expenses concern obligations already incurred. French PCA, FAE, CCA and FNP provide useful vocabulary bridges, but the applicable framework and contract determine recognition and presentation.
Four concepts, two sides of the closing date
The table is a vocabulary guide based on the French PCG consolidated at January 1, 2026, not a claim of identical recognition rules. A US revenue contract needs its own analysis under the relevant US GAAP guidance. An amount described as accrued income may be a contract asset or a receivable depending on whether the right to payment is conditional.
ANC regulation 2026-03, homologated in August 2026, applies to financial years beginning on or after January 1, 2027 and to sales contracts concluded or renewed after its entry into force; early application is permitted. The examples use service periods in 2026. Check the applicable period and contract transition before reusing the method.
| French term | Closing situation | Common English label | French account family |
|---|---|---|---|
| PCA | Revenue booked before future service | Deferred revenue / contract liability where applicable | 487 |
| FAE | Earned amount not yet billed | Accrued income / unbilled receivable or contract asset | 418 |
| CCA | Expense booked for future consumption | Prepaid expenses | 486 |
| FNP | Expense incurred before invoice arrives | Accrued expenses / accrued liabilities | 408 |
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Deferred revenue: show what remains to be earned
Fictitious example: a $12,000 subscription covers August 1, 2026 through July 31, 2027. Assume the service is delivered evenly over time and an actual-days convention includes both endpoints. At December 31, 153 of 365 service days have elapsed and 212 remain.
The illustrative deferred amount is $12,000 × 212 / 365 = $6,969.86. The amount allocated to elapsed service is $5,030.14 by difference. This arithmetic is appropriate only if the assumed pattern reflects the service and the recognition policy. It cannot establish an over-time recognition conclusion by itself.
Keep invoice, contract, start and end dates, amount, currency, calculation convention and prior posted balance together. A service period filled in from a guess produces a precise-looking number without support. Flag missing or inconsistent dates for review rather than excluding the invoice silently.
Accrued income: include evidence received after cutoff
Fictitious example: an evenly delivered service runs from December 10, 2026 through January 8, 2027 and is invoiced for $8,000 on January 10. With thirty inclusive service days and twenty-two elapsed at December 31, the illustrative amount attributable to elapsed service is $8,000 × 22 / 30 = $5,866.67.
An invoice export made before January 10 would not contain this bill. The closing process therefore needs a deliberate search for earned but unbilled amounts, using contracts, service evidence and subsequent invoices. A schedule’s extraction date is part of its evidence.
Under Topic 606 presentation guidance, a receivable reflects an unconditional right to consideration; a contract asset involves a condition beyond simply the passage of time. The FASB’s implementation Q&A explains this distinction. The French label FAE alone does not settle which presentation applies to the US contract.
Prepaid and accrued expenses follow the consumption question
For expense accruals, a contract, order, service confirmation or subsequent invoice may support the amount and period. A later invoice can be relevant even if the supplier has not yet been paid. Distinguish the evidence that service was consumed from the evidence of settlement.
These examples assume straight-line service and exclude tax complications. Different delivery patterns, variable consideration or a right to reimbursement can change the analysis. The amount is a working-paper illustration to be assessed under the applicable policy, not a universal entry for every insurance or maintenance contract.
Accrued expense · fictitious
Maintenance of $2,760 covers November 1, 2026 through January 31, 2027 and is billed at the end. Sixty-one of ninety-two inclusive days have elapsed at December 31: the illustrative incurred amount is $1,830.00.
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Day-count assumptions change the result
A day-count convention belongs in the calculation, not in the reviewer’s memory. State whether the start and end dates are included and whether the closing day is elapsed. A single-day contract and a leap year are useful checks because they quickly expose inconsistent denominator or boundary rules.
| Convention | Remaining / total | Deferred amount |
|---|---|---|
| Actual days; both endpoints included; closing day elapsed | 212 / 365 | $6,969.86 |
| End date excluded; closing day elapsed | 211 / 364 | $6,956.04 |
| Illustrative equal-month allocation | 7 / 12 | $7,000.00 |
Scroll the table if needed.
The convention is selected for the contract and policy, documented and applied consistently. This table does not prescribe a mandatory method.
Reversal and new accrual: start with the amount actually posted
For the subscription example, the inclusive-day deferred amount at November 30 is $7,989.04. At December 31 it is $6,969.86. A monthly reversal-and-reconstitution approach compares these balances with the entries actually in the ledger. A recomputed theoretical opening amount is not evidence of the opening amount posted.
| December movement | Debit | Credit | Amount |
|---|---|---|---|
| Reverse November deferred amount | 487 deferred revenue | 706 service revenue | $7,989.04 |
| Set up December deferred amount | 706 service revenue | 487 deferred revenue | $6,969.86 |
| Net December revenue movement | Illustrative increase | Difference between the two entries | $1,019.18 |
Scroll the table if needed.
Currency and revenue schedules: avoid double counting
Keep transaction currency, functional currency and the rate basis separate. A classification under foreign-currency guidance determines whether a historical basis or a closing-date remeasurement is relevant. A future-service liability and a fixed-cash obligation can pose different questions. The professional reviews the contract rather than treating every amount labelled deferred revenue identically.
When QuickBooks Online Advanced revenue recognition has already distributed an invoice, reconcile its schedule and residual before adding a second cut-off calculation. Intuit documents that feature’s operation; the engagement team determines how its output fits the contract and reporting policy. Two schedules working correctly in isolation can still recognize the same amount twice.
A reviewer’s checklist for common cut-off errors
Close Review calculates accrued and deferred revenue from the invoice register and brings the proposed adjustments into the workpaper. The reviewer checks inputs, conventions, existing postings and the final conclusion. The wider prepaid- and accrued-expense teaching examples above explain accounting questions; they do not expand the product’s published dedicated cut-off controls.
- Missing service periods or unsupported assumed dates.
- Different names or identifiers for the same contract.
- Amounts in different currencies added without a documented basis.
- A theoretical recalculation used instead of the opening balance actually posted.
- Different boundary conventions used in neighboring periods.
- Accrued income based only on invoices extracted before cutoff.
- An existing revenue recognition schedule counted a second time.
- Journal entries mistakenly included as new service invoices.
Common questions
Is deferred revenue always the same as a contract liability?
It is a common operating label. Contract liability is a presentation concept under the applicable revenue guidance; the contract and transaction need to be assessed.
Is French FAE always a contract asset in US GAAP?
No. Depending on the right to payment, the amount may be a receivable or a contract asset. A vocabulary translation does not settle the presentation.
Should the closing day be counted as elapsed?
That depends on the documented convention and service pattern. The examples explicitly count it as elapsed in the inclusive-day method.
Why does accrued income depend on the extraction date?
Invoices raised after cutoff can document earlier service. An export made too early can omit those amounts, so the review needs subsequent evidence.
Should a prior accrual be reversed from a recalculated number?
Reconcile to the amount actually posted. A theoretical reconstruction can differ from the ledger because of prior choices, rounding or corrections.
Can a revenue recognition module and a separate schedule both be used?
Yes, if their populations and residual balances are reconciled. Otherwise the same invoice can be allocated twice.
Sources for further reading
Dated source checks do not replace review by the professional responsible for your engagement.
- ANC — PCG consolidated January 2026: accounts and adjustment principlesChecked
- Légifrance — Homologation of ANC 2026-03 and effective/transition provisionsChecked
- FASB — Revenue Recognition Implementation Q&As, January 2020, question 61Checked
- Intuit — Revenue recognition in QuickBooks Online AdvancedChecked
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