What occurs when total revenue from a customer exceeds the amounts invoiced to date?

When total revenue from a customer exceeds the amounts invoiced to date, a contract asset arises. This situation typically occurs in a contract where revenue is recognized based on the progress of work completed, while the invoicing may not reflect the total revenue recognized yet.

In essence, the contract asset represents the right to consideration in exchange for goods or services that have been transferred to the customer, which have not yet been invoiced. This scenario often arises in long-term contracts or projects where the payment is structured on a schedule that doesn't match the revenue recognition. For instance, if a service has been delivered but the invoice has not yet been issued, the company recognizes revenue and creates a contract asset for the amount of that revenue until the invoice is actually sent to the customer.

Other options relate to different aspects of revenue recognition and deferment. Deferred revenue, for instance, pertains to payments received before services or goods are provided, leading to a liability rather than an asset. Contract liabilities occur when there’s an obligation to transfer goods or services when payment has been received, which is the reverse of what is happening in this scenario. Revenue recognition adjustments would imply changes in how revenue is recorded rather than presenting a situation of an asset arising due to revenue exceeding the invoiced