Base Currency Transaction Without Revenue Allocation
The functions discussed in this topic require the Revenue Commitments feature to be enabled.
This example illustrates the line level deferred revenue reclassification process as of Version 2013 Release 2. See Adopting Line Level Deferred Revenue Reclassification.
In this scenario, the sales amount on individual line items is the same as the revenue allocation amount. You create the sales order on January 1, as shown in this table.
|
Item |
Amount |
Deferred Revenue Account |
Revenue Account |
Revenue Recognition Schedule |
|---|---|---|---|---|
|
1 |
$120 |
DefRev1 |
Rev1 |
One-time revenue recognition |
|
2 |
$120 |
DefRev2 |
Rev2 |
3–month even period revenue recognition |
On January 10, you create a sales invoice to partially bill the order. Because the sales amounts on individual items are the same as their revenue allocation amounts, the billing amount allocation step is skipped. The G/L posting from this bill is based on the gross billing amount as follows:
|
Item |
Billing Amount |
Debit |
Credit |
|---|---|---|---|
|
1 |
$60 |
A/R 60 |
DefRev1 60 |
|
2 |
$60 |
A/R 60 |
DefRev2 60 |
At the end of January, you post a revenue recognition JE as shown in this table.
|
Item |
Revenue Recognition Amount |
Debit |
Credit |
|---|---|---|---|
|
1 |
$120 |
DefRev1 120 |
Rev1 120 |
|
2 |
$40 |
DefRev2 40 |
Rev2 40 |
The gross balances at the end of January are as follows:
|
Account |
Balance |
|---|---|
|
A/R |
120.00 |
|
Rev1 |
120.00 |
|
Rev2 |
40.00 |
|
DefRev1 |
–60.00 |
|
DefRev2 |
20.00 |
Next you complete the reclassification process. See Reclassifying Deferred Revenue for Revenue Commitments. The total billing amount of $120 is less than the total revenue recognition amount of $160. Therefore, the process debits Unbilled Receivable and credits Deferred Revenue. The Deferred Revenue System account is used to hold the temporary deferred revenue balance before the order is fully billed and recognized. The adjustment JE is as follows:
|
Account |
Debit |
Credit |
|---|---|---|
|
Unbilled Receivable |
40 |
|
|
Deferred Revenue System |
|
40 |
The balances after the adjustment are as follows:
|
Account |
Balance |
|---|---|
|
A/R |
120.00 |
|
Rev1 |
120.00 |
|
Rev2 |
40.00 |
|
Total revenue |
160.00 |
|
DefRev1 |
–60.00 |
|
DefRev2 |
20.00 |
|
Deferred Revenue System |
40.00 |
|
Total Deferred Revenue |
0.00 |
|
Unbilled receivable |
40.00 |
At the order level, the total deferred revenue balance is zero (-60+20+40).
On February 10, you create the next invoice for the order as shown in this table.
|
Item |
Billing Amount |
Debit |
Credit |
|---|---|---|---|
|
1 |
$60 |
A/R 60 |
DefRev1 60 |
|
2 |
$60 |
A/R 60 |
DefRev2 60 |
The revenue recognition JE at the end of February is as follows:
|
Item |
Revenue Recognition Amount |
Debit |
Credit |
|---|---|---|---|
|
2 |
$40 |
DefRev2 40 |
Rev2 40 |
The gross account balance at the end of February is as follows:
|
Account |
Balance |
|---|---|
|
A/R |
240 |
|
Rev1 |
120 |
|
Rev2 |
80 |
|
DefRev1 |
0 |
|
DefRev2 |
20 |
Next you complete the reclassification process for February. The total billing amount of $240 is now greater than the total revenue recognition amount of $200. The adjustment JE reverses the prior unbilled receivable adjustment as shown:
|
Account |
Debit |
Credit |
|---|---|---|
|
Unbilled Receivable |
|
40 |
|
Deferred Revenue System |
40 |
|
After the reclassification adjustment, the ending balances are as shown:
|
Account |
Balance |
|---|---|
|
A/R |
240.00 |
|
Rev1 |
120.00 |
|
Rev2 |
80.00 |
|
Total Revenue |
200.00 |
|
DefRev1 |
0.00 |
|
DefRev2 |
40.00 |
|
DefRev system |
0.00 |
|
Total Deferred Revenue |
40.00 |
|
Unbilled Receivable |
0.00 |
When the order is fully invoiced and recognized in March, all deferred revenue and unbilled receivable accounts will have a zero balance.