{"id":113,"date":"2025-12-03T10:00:47","date_gmt":"2025-12-03T10:00:47","guid":{"rendered":"https:\/\/www.vsinghcpa.com\/blog\/?p=113"},"modified":"2026-04-14T18:20:25","modified_gmt":"2026-04-14T18:20:25","slug":"tip-4-year-end-validate-revenue-lease-entries","status":"publish","type":"post","link":"https:\/\/www.vsinghcpa.com\/blog\/tip-4-year-end-validate-revenue-lease-entries\/","title":{"rendered":"Tip # 4: Year End &#8211; Validate Revenue &#038; Lease Entries"},"content":{"rendered":"<p><strong>GovCon Wednesdays<\/strong><br \/>\n<strong>Estimated Read Time: 5 minutes<\/strong><\/p>\n<p>Revenue recognition and lease accounting are two of the most complex and most audited areas for government contractors.<\/p>\n<p>Getting these entries right ensures your financial statements comply with\u00a0GAAP, meet\u00a0DCAA standards, and present an accurate picture of your 2025 performance before year-end.<\/p>\n<h2>Why It Matters<\/h2>\n<p>When auditors or contracting officers review your financials, they look closely at\u00a0how you recognize revenue\u00a0and\u00a0account for leases.<\/p>\n<p>Revenue recorded too early, too late, or under the wrong performance obligation can distort your indirect rates and misstate your results. Similarly, missing lease liabilities or right-of-use assets can lead to incomplete balance sheets and compliance risks under\u00a0ASC 842.<\/p>\n<p>Validating both ensures your books are accurate, defensible, and ready for any review.<\/p>\n<h2>Step 1: Review Revenue Recognition (ASC 606)<\/h2>\n<p>The\u00a0ASC 606 standard\u00a0requires companies to recognize revenue based on when performance obligations are satisfied \u2014 not simply when invoices are issued.<\/p>\n<p>Use the\u00a0five-step ASC 606 model\u00a0to confirm each contract\u2019s revenue treatment:<\/p>\n<ol>\n<li>Identify the contract with the customer.<\/li>\n<li>Identify the distinct performance obligations.<\/li>\n<li>Determine the transaction price.<\/li>\n<li>Allocate the price to performance obligations.<\/li>\n<li>Recognize revenue as obligations are satisfied.<\/li>\n<\/ol>\n<p>For GovCons, this often means recognizing revenue over time based on project milestones, hours worked, or percentage of completion depending on contract type.<\/p>\n<p>\u2705\u00a0<em>Best practice:<\/em> Maintain documentation showing how you determined each performance obligation and how revenue was recognized auditors will ask for it.<\/p>\n<h2>Step 2: Verify Lease Entries (ASC 842)<\/h2>\n<p>The\u00a0ASC 842 lease accounting standard\u00a0requires that both operating and finance leases appear on your balance sheet as:<\/p>\n<ul>\n<li>A\u00a0right-of-use (ROU) asset, and<\/li>\n<li>A\u00a0lease liability\u00a0based on the present value of lease payments.<\/li>\n<\/ul>\n<p>Review your active leases for offices, equipment, and vehicles to ensure they are recorded correctly.<\/p>\n<p>Key actions:<\/p>\n<ul>\n<li>Confirm lease schedules match your general ledger.<\/li>\n<li>Update amortization schedules for 2025.<\/li>\n<li>Verify lease terms and discount rates are accurate.<\/li>\n<li>Reconcile lease payments to your accounts payable and ROU asset accounts.<\/li>\n<\/ul>\n<p>\u2705\u00a0<em>Tip:<\/em> Even small equipment leases can trigger ASC 842 reporting ensure none were missed.<\/p>\n<h2>Step 3: Cross-Check for Consistency<\/h2>\n<p>After reviewing both revenue and lease entries, cross-check your results for consistency across your books:<\/p>\n<ul>\n<li>Revenue recognized should match unbilled receivables and project reports.<\/li>\n<li>Lease expense should align with your indirect cost pool assignments.<\/li>\n<li>Financial statement disclosures should reflect updated balances and assumptions.<\/li>\n<\/ul>\n<p>A quick consistency check avoids mismatched schedules that can raise red flags during audit or financial review.<\/p>\n<h2>Accurate Reporting = Audit Confidence<\/h2>\n<p>Properly accounting for revenue and leases isn\u2019t just about GAAP compliance it\u2019s about transparency, accuracy, and building trust with auditors, contracting officers, and stakeholders.<\/p>\n<p>VSINGH CPA\u00a0helps GovCons apply\u00a0ASC 606 and ASC 842 standards accurately ensuring your books remain compliant, audit-ready, and reflective of your true performance.<\/p>\n<p>\ud83d\udc49 Check out our YouTube Shorts for quick GovCon year-end tips: https:\/\/www.youtube.com\/@vsinghcpallc<\/p>\n<p>&nbsp;<\/p>\n<p>Coming Up in the GovCon Year-End Closing Series<\/p>\n<ul>\n<li><strong>\u2705Tip #1:<\/strong>\u00a0Know Your Accounting System &amp; Year-End Checklist<\/li>\n<li><strong>\u2705Tip #2:<\/strong>\u00a0Communicate Early with Tax Professionals &amp; Auditors<\/li>\n<li><strong>\u2705Tip #3:<\/strong>\u00a0Reconcile and Analyze Accounts<\/li>\n<li><strong>\u2705Tip #4:\u00a0<\/strong>Validate Revenue &amp; Lease Entries (ASC 606 &amp; ASC 842)<\/li>\n<li><strong>5\ufe0f\u20e3Tip #5:<\/strong>\u00a0Prepare 1099s &amp; Charitable Contributions<\/li>\n<li><strong>6\ufe0f\u20e3Tip #6:<\/strong>\u00a0Review Contract Status Reports &amp; Submit Data to Tax\/Audit Teams<\/li>\n<li><strong>7\ufe0f\u20e3Tip #7:\u00a0<\/strong>Final Wrap-Up \u2014 Year-End Complete, What\u2019s Next?<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>GovCon Wednesdays Estimated Read Time: 5 minutes Revenue recognition and lease accounting are two of the most complex and most audited areas for government contractors. Getting these entries right ensures your financial statements comply with\u00a0GAAP, meet\u00a0DCAA standards, and present an accurate picture of your 2025 performance before year-end. Why It Matters When auditors or contracting officers review your financials, they look closely at\u00a0how you recognize revenue\u00a0and\u00a0account for leases. Revenue recorded&#8230; <a class=\"more-link\" href=\"https:\/\/www.vsinghcpa.com\/blog\/tip-4-year-end-validate-revenue-lease-entries\/\">Read More<a><\/p>\n","protected":false},"author":2,"featured_media":215,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"revenue-recognition lease-accounting asc606-asc842","_genesis_custom_post_class":"govcon-blog year-end-series revenue-validation","_genesis_layout":"","footnotes":""},"categories":[4],"tags":[79,80,22,14,71,18,31,82,81,66],"class_list":{"0":"post-113","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-year-end","8":"tag-asc-606","9":"tag-asc-842","10":"tag-audit-readiness","11":"tag-dcaa-compliance","12":"tag-financial-reporting","13":"tag-govcon-accounting","14":"tag-government-contracting","15":"tag-lease-accounting","16":"tag-revenue-recognition","17":"tag-year-end-closing","18":"entry","19":"govcon-blog year-end-series revenue-validation"},"_links":{"self":[{"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/posts\/113","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/comments?post=113"}],"version-history":[{"count":3,"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/posts\/113\/revisions"}],"predecessor-version":[{"id":127,"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/posts\/113\/revisions\/127"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/media\/215"}],"wp:attachment":[{"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/media?parent=113"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/categories?post=113"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vsinghcpa.com\/blog\/wp-json\/wp\/v2\/tags?post=113"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}