Handling Deferred Revenue
Your accounting may require to book deferred revenue to a dedicated account.
Understanding Deferred Revenue
Generally, deferred revenue (or deferred income) refers to unearned money – that is, payments for goods or services to be delivered in the future. Usually, you record this revenue as a liability until you have made the delivery (or actually earned the income). At this time, the recorded liability is converted into revenue.
Deferred revenue is very common with service providers, who typically request up-front payments in exchange for future service periods.
Deferred Revenue in JustOn
JustOn can distribute the revenue of an invoice to one or multiple future booking periods when using the Service Period, Booking Month, Service Month or Calendar Year revenue recognition rules. The deferred revenue as well as the complete tax amount are booked in the first involved booking period, based on the booking date set on the invoice. Consequently, the revenue amount booked during the defined period will be "taken out" from the deferred revenue account. For examples, see Revenue Deferral to Multiple Booking Periods.
JustOn creates individual deferred revenue bookings that are split along the applied tax rate in the first involved booking period. The subsequent bookings will be, however, combined – no longer separated by tax rate.
In certain circumstances, the service period of an invoice line item may be after the invoice date but still in the same month. In this case, JustOn also produces deferred revenue booking details. For an example, see Revenue Deferral Within One Month.
For JustOn to generate a booking detail for the deferred revenue, you must create a corresponding Collective Accounts custom setting of the type Deferred.
By default, JustOn fills the field Business Partner Account Number in booking details for deferred revenue using the value of the Business Partner Account field of the corresponding Collective Accounts custom setting record. Your business use case, however, may require to use the value of the custom field ON_DebtorNo on the account instead. To support this scenario, you must activate the corresponding global setting.
Info
The tax recognition rule Sync With Revenue creates an individual tax booking detail for each revenue booking detail that is created using the Service Month revenue recognition rule, which disables the deferred revenue booking.
DATEV automatic accounts and revenue deferral
When transferring bookkeeping data to DATEV, you can, generally, configure JustOn to use gross values when creating bookkeeping data to support automatic accounts (Automatikkonten).
If, however, you use revenue recognition rules to distribute revenues to future booking periods (deferred revenue), you must book net revenues and taxes separately. That is, you either
- do not use DATEV automatic accounts for booking deferred revenue, or
- switch off the automatic tax calculation – using the custom booking code field
BuCodeset to40with the relevant booking details (see Enabling Data Transfer to DATEV).
Example Use Cases
Revenue Deferral to Multiple Booking Periods
Consider the following example: There is an invoice whose amount is to be distributed equally to four booking periods using the Booking Month recognition rule. Your accounting requires the deferred revenue to be booked to the account 2500. To this end, you create the following collective account setting:
| Field | Value |
|---|---|
| Name | Deferred Revenue |
| Type | Deferred |
| Account | 2500 |
Matching service period, one tax rate
Assume the following invoice:
| # | Quantity | Unit Price | Billing Factor | Service Period Start | Service Period End | Tax Rate | Pos Total (net) | |
|---|---|---|---|---|---|---|---|---|
| 1 | 1 | 100,00 | 4 | 2018-05-01 | 2018-08-31 | 19% | 400,00 | |
| Subtotal Net | 400,00 | |||||||
| Tax | 76,00 | |||||||
| Grand Total | 476,00 |
JustOn generates the following booking details on invoice finalization:
| # | Booking Period | Type | Amount | Notes |
|---|---|---|---|---|
| 1 | 2018-05 | Tax | 76 | The tax is always booked in the first booking period. If there is a corresponding collective account setting for taxes, it specifies the account number. |
| 2 | Revenue | 100 | 1/4 of the revenue is booked in the first booking period. The account number is taken from a corresponding G/L accounts setting. |
|
| 3 | Deferred | 300 | 3/4 of the revenue is booked to the deferred revenue account in the first booking period. The account number is taken from the corresponding collective account setting ( 2500). |
|
| 4 | 2018-06 | Revenue | 100 | 1/4 of the revenue is booked in the second booking period. |
| 5 | Deferred | -100 | 1/4 of the revenue is taken out from the deferred revenue account to offset the booked revenue in the second booking period. | |
| 6 | 2018-07 | Revenue | 100 | 1/4 of the revenue is booked in the third booking period. |
| 7 | Deferred | -100 | 1/4 of the revenue is taken out from the deferred revenue account to offset the booked revenue in the third booking period. | |
| 8 | 2018-08 | Revenue | 100 | 1/4 of the revenue is booked in the fourth booking period. |
| 9 | Deferred | -100 | 1/4 of the revenue is taken out from the deferred revenue account to offset the booked revenue in the fourth booking period. |
Matching service period, multiple tax rates
Now assume there are two invoice line items with different tax rates.
| # | Quantity | Unit Price | Billing Factor | Service Period Start | Service Period End | Tax Rate | Pos Total (net) | |
|---|---|---|---|---|---|---|---|---|
| 1 | 1 | 100,00 | 4 | 2018-05-01 | 2018-08-31 | 19% | 400,00 | |
| 2 | 1 | 50,00 | 4 | 2018-05-01 | 2018-08-31 | 7% | 200,00 | |
| Subtotal Net | 600,00 | |||||||
| Tax (19%) | 76,00 | |||||||
| Tax (7%) | 38,00 | |||||||
| Grand Total | 714,00 |
Accordingly, JustOn generates the following booking details on invoice finalization:
| # | Booking Period | Type | Amount | Notes |
|---|---|---|---|---|
| 1 | 2018-05 | Tax | 76 | Taxes are booked in the first booking period – if set accordingly, to separate accounts. |
| 2 | Tax | 38 | ||
| 3 | Revenue | 150 | 1/4 of the (combined) revenue is booked in the first booking period. | |
| 4 | Deferred | 300 | 3/4 of the revenue taxed 19% is booked to the deferred revenue account in the first booking period. | |
| 5 | Deferred | 150 | 3/4 of the revenue taxed 7% is booked to the same deferred revenue account in the first booking period. | |
| 6 | 2018-06 | Revenue | 150 | 1/4 of the (combined) revenue is booked in the second booking period. |
| 7 | Deferred | -150 | 1/4 of the (combined) revenue is taken out from the deferred revenue account to offset the booked revenue in the second booking period. | |
| 8 | 2018-07 | Revenue | 150 | 1/4 of the (combined) revenue is booked in the third booking period. |
| 9 | Deferred | -150 | 1/4 of the (combined) revenue is taken out from the deferred revenue account to offset the booked revenue in the third booking period. | |
| 10 | 2018-08 | Revenue | 150 | 1/4 of the (combined) revenue is booked in the fourth booking period. |
| 11 | Deferred | -150 | 1/4 of the (combined) revenue is taken out from the deferred revenue account to offset the booked revenue in the fourth booking period. |
Service period different from booking month, one tax rate
Now assume the service period does not start at the beginning (or end at the end) of a month. In this case, the booking amount is calculated proportionally – based on the number of relevant days – for this month.
| # | Quantity | Unit Price | Billing Factor | Service Period Start | Service Period End | Tax Rate | Pos Total (net) | |
|---|---|---|---|---|---|---|---|---|
| 1 | 1 | 100,00 | 4 | 2018-05-10 | 2018-09-09 | 19% | 400,00 | |
| Subtotal Net | 400,00 | |||||||
| Tax | 76,00 | |||||||
| Grand Total | 476,00 |
Following this example, the May part is 22 days, so the May "revenue portion" is calculated for 22 days like (100/31) x 22 = 70,97. The remainder (100 - 70,97 = 29,03) is booked in September. Consequently, JustOn generates the following booking details on invoice finalization:
| # | Booking Period | Type | Amount | Notes |
|---|---|---|---|---|
| 1 | 2018-05 | Tax | 76,00 | The tax is always booked in the first booking period. |
| 2 | Revenue | 70,97 | The "revenue portion" for the first (incomplete) month ((100/31) x 22 = 70,97) is booked in the first booking period. |
|
| 3 | Deferred | 329,03 | 3/4 of the revenue plus the remaining revenue from the first service period month (100 - 70,97 = 29,03) is booked to the deferred revenue account in the first booking period. |
|
| 4 | 2018-06 | Revenue | 100,00 | 1/4 of the revenue is booked in the second booking period. |
| 5 | Deferred | -100,00 | 1/4 of the revenue is taken out from the deferred revenue account to offset the booked revenue in the second booking period. | |
| 6 | 2018-07 | Revenue | 100,00 | 1/4 of the revenue is booked in the third booking period. |
| 7 | Deferred | -100,00 | 1/4 of the revenue is taken out from the deferred revenue account to offset the booked revenue in the third booking period. | |
| 8 | 2018-08 | Revenue | 100,00 | 1/4 of the revenue is booked in the fourth booking period. |
| 9 | Deferred | -100,00 | 1/4 of the revenue is taken out from the deferred revenue account to offset the booked revenue in the fourth booking period. | |
| 10 | 2018-09 | Revenue | 29,03 | The remaining revenue from the first service period month (100 - 70,97 = 29,03) is booked in the fifth booking period. |
| 11 | Deferred | -29,03 | The remaining revenue from the first service period month is taken out from the deferred revenue account to offset the booked revenue in the fifth booking period. |
Short service period across two months, one tax rate
Assume again the service period does not start at the beginning (or end at the end) of a month so that the booking amount is calculated proportionally. Now if the service period is less than one month, the calculation is a bit trickier.
Example invoice:
| # | Quantity | Unit Price | Service Period Start | Service Period End | Tax Rate | Pos Total (net) | |
|---|---|---|---|---|---|---|---|
| 1 | 1 | 100,00 | 2019-05-25 | 2019-06-03 | 19% | 100,00 | |
| Subtotal Net | 100,00 | ||||||
| Tax | 19,00 | ||||||
| Grand Total | 119,00 |
The service period is just ten days – seven in May (7/31), three in June (3/30). Since there is no complete month, the revenue calculation for May must "scale" the complete amount to the given period portions like 100/(7/31+3/30) x 7/31 = 69,31. The remainder is calculated like 100 - 69,31 = 30,69. It is first booked to the deferred revenue account and booked as revenue in June. Consequently, JustOn generates the following booking details on invoice finalization:
| # | Booking Period | Type | Amount | Notes |
|---|---|---|---|---|
| 1 | 2019-05 | Tax | 19,00 | The tax is booked in the first booking period. |
| 2 | Revenue | 69,31 | The "revenue portion" for the first (incomplete) month (100/(7/31+3/30) x 7/31 = 69,31) is booked in the first booking period. |
|
| 3 | Deferred | 30,69 | The remaining revenue from the incomplete service period month (100 - 69,31 = 30,69) is booked to the deferred revenue account in the first booking period. |
|
| 4 | 2019-06 | Revenue | 30,69 | The remaining revenue from the first service period month (100 - 69,31 = 30,69) is booked in the second booking period. |
| 5 | Deferred | -30,69 | The remaining revenue from the first service period month is taken out from the deferred revenue account to offset the booked revenue in the second booking period. |
Revenue Deferral Within One Month
Now consider the following use case: There is an invoice created on 2019-05-10. The service period of the invoice line item, however, starts on 2019-05-15 and ends on 2019-05-20. That is, all dates are within one month – but applying the revenue recognition rule Booking Month and the service period after the invoice date make JustOn produce deferred revenue booking details.
Example invoice (invoice date: 2019-05-10):
| # | Quantity | Unit Price | Service Period Start | Service Period End | Tax Rate | Pos Total (net) | |
|---|---|---|---|---|---|---|---|
| 1 | 1 | 100,00 | 2019-05-15 | 2019-05-20 | 19% | 100,00 | |
| Subtotal Net | 100,00 | ||||||
| Tax | 19,00 | ||||||
| Grand Total | 119,00 |
JustOn generates the following booking details on invoice finalization:
| # | Booking Period | Type | Debit/Credit Flag | Booking Date | Amount |
|---|---|---|---|---|---|
| 1 | 2019-05 | Deferred | H (Credit) |
2019-05-10 | 119 |
| 2 | Deferred | S (Debit) |
2019-05-15 | 119 | |
| 3 | Revenue | H (Credit) |
2019-05-15 | 100 | |
| 4 | Tax | H (Credit) |
2019-05-15 | 19 |