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Revenue recognition is a GAAP principle that determines when and how revenue is recognized. It requires recognizing revenue when goods or services are realized and earned, regardless of cash receipt. The matching principle ensures that revenue and associated costs are reported in the same accounting period.
Recognizing revenue
When booking an invoice, the total amount is recognized. Recognition split total amount into sales income, tax and deferred.
| sales income | tax | deferred |
|---|
| 12.000 | 2.400 | subject to a strategy |
Strategies
All of the following examples are based on a total of 12.000 sold on the 20th of january.
| strategy | description | example |
|---|
| none | no revenue is recognized | |
| even distribution | revenue is recognized evenly every month | 1.000 is booked as income in january. 1.000 is deferred monthly for the following 11 months. |
| exact daily accrual | revenue is recognized by the exact number of days per month | 1.019 is booked as income in january (31 days). 921 is deferred in february (28 days) etc. |
| daily accrual | revenue is recognized by the exact number of days remaining per month | 362 is booked as income in january (11 days). 921 is deferred in february (28 days) etc. 656 is deferred (20 days) will fall onto january the following year. |
Even distribution
Algorithm will be calculated as 12.000 / 12.
| month | jan | feb | mar | apr | may | jun | jul | aug | sep | oct | nov | dec |
|---|
| days | 31 | 28 | 31 | 30 | 31 | 30 | 31 | 31 | 30 | 31 | 30 | 31 |
| income | 1.000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| deferred | 0 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 | 1.000 |
Exact daily accrual
Algorithm will be calculated as 12.000 / 365 x days.
| month | jan | feb | mar | apr | may | jun | jul | aug | sep | oct | nov | dec |
|---|
| days | 31 | 28 | 31 | 30 | 31 | 30 | 31 | 31 | 30 | 31 | 30 | 31 |
| income | 1.019 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| deferred | 0 | 921 | 1.019 | 986 | 1.019 | 986 | 1.019 | 1.019 | 986 | 1.019 | 986 | 1.019 |
Daily accrual
Algorithm will be calculated as 12.000 / 365 x days.
| month | jan | feb | mar | apr | may | jun | jul | aug | sep | oct | nov | dec | jan |
|---|
| days | 11 | 28 | 31 | 30 | 31 | 30 | 31 | 31 | 30 | 31 | 30 | 31 | 31 |
| income | 362 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| deferred | 0 | 921 | 1.019 | 986 | 1.019 | 986 | 1.019 | 1.019 | 986 | 1.019 | 986 | 1.019 | 658 |
