Case study: a subscription business
Who asked: Fern Atlas Subscriptions owner.
Question: How much unearned service remains at March 31?
Data: Annual and mid-month contracts, explicit half-month policy and refund.
Done: A supported deferred revenue roll-forward and checked ending liability.
Fern Atlas Subscriptions sells access to a monthly service. Cash arrives before all service is delivered, so the owner needs a deferred revenue roll-forward. Record annual and mid-month plans as liabilities, recognize only the earned portion, and keep a refund separate from ordinary operating expense. Every step uses the same company state.
The annual plan begins March 1. The second plan begins March 16, and this case's contract policy earns half of its first monthly amount in March. That explicit convention avoids assuming every company uses the same day-count method. A canceled future-service amount is refunded before being earned. The final checked balance answers how much service the company still owes at March 31.
Beginning deferral + cash billed in advance - earned service - unearned refunds = ending deferral.
Build and check a subscription liability roll-forward.