> ## Documentation Index
> Fetch the complete documentation index at: https://docs.plude.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Recognition

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 |

As every [month close](/revenue/revenue-monthclosing), revenue is shifted from deferred revenue to income by debitting *income* and credit *deferred revenue*.

# 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. |

Each strategy is examplified below.

## 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 |