What it is
A dealership books a sale when the customer signs, but the cash comes from the lender days or weeks later. Contracts in transit are the receivable for that gap, and slow or unfunded deals are a classic sign of a rejected contract or a cutoff problem. The workbook ages the open contracts and tests what funded after the as-of date.
Finance reserve and add-on product income can be charged back when the customer cancels or defaults. The second half of the workbook calculates the required chargeback reserve from the dealer’s own cancellation experience by product, rolls the recorded reserve forward and compares the two.
When to use it
- At year end, to support the contracts in transit receivable and the cutoff of vehicle sales.
- When finance reserve, service contract or GAP income is a significant part of gross profit.
- When the dealer changes lenders or product providers and the cancellation terms change.
What’s inside
- Contracts tab: 60 rows with open amount, days outstanding, aging bucket and subsequent funding flag
- Aging summary and tie of the open amount to the ledger
- Chargeback reserve calculation by product from rates you support
- Reserve rollforward with an over or under reserved test and a tie to the ledger
Standard cited
This template follows ASC 606 / AU-C 540. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 540 explained.
Questions
How do I test subsequent funding?
Enter the funded date from the lender’s remittance or the bank statement. Contracts funded after the as-of date stay open at that date and are marked as subsequent funding. Contracts still unfunded after your test date need a reason and may need to be reversed.
Where do the chargeback rates come from?
From the dealer’s own history of cancellations and charge-backs by product and by age of contract, adjusted for changes in terms and customer mix. The workbook takes your rates as inputs and shows the result. It does not supply rates.
Why is the reserve a revenue question?
Income that may be reversed is variable consideration. Revenue is recognized only to the extent it is probable that a significant reversal will not occur, so the reserve is the estimate of the amount that is not recognized or is returned.
Related templates
- Audit Program: Auto Dealership
- Auto Dealer Floor Plan Reconciliation
- Cutoff Testing Workpaper (Sales, Purchases, Inventory)
- ASC 606 Revenue Recognition Schedule
Last updated 11/05/2026. All free templates.