Prepayment and Deferred Revenue Report

To follow on from: Dealing with Prepayments and Deferred Revenue

Scenario

The head of accounts would like a function for creating the recurring journals for the prepayments and deferred revenue, there is a link to download the report in the foot of this blog post, I would urge you to read on to understand how this report is designed and how it works, this report is designed as a learning aid for developers.

There are several points that need to be considered:

To be able to select the original transaction from a list
Choose which account to balance to
A transaction may already part realized
A transaction may start to be realized in the future
Input starting and ending dates for the transaction
Dimensions must be carried across

Dealing with Deferred Revenue

We have two software licence invoices posted to the system this month and we want to create a journal to deal with the deferred revenue, we have already supplied services the first invoice, the is a renewal that starts at a future date

The Request Form

The First Invoice

As you can see we are already within the period covered by this Invoice, the date we are processing this invoice is still in June, so we do not want to defer any revenue that we have already provided services for, the two accounts we used for this example are:

6955 – Service Contract Sale to post the invoice to

5797 – Prepaid Software Contracts to defer the revenue

We run the report select a Journal Template and Journal Batch, lookup or enter account number 6955 then drill down and pick up the Invoice Entry

We then enter the start and end date for the service contract duration

You can see that the first recurring entry will be in July and the amount to process has taken into account the expired days, as the value could not be divided by 10 the report created the last Journal Entry with the 0.02 difference, we then press the button to transfer the lines to the Recurring Journal

In this example six lines have been created, the first two reverse out the remaining amount to the deferred revenue account, this will run just the once, the next two lines are the fixed recurring values and will run for 9 months, the last two lines complete the process and deal with the final transaction.

The Second Invoice

This invoice has been paid to cover services that are not yet due, and will start in the middle of August so we need to defer the whole invoice and in the first and last months deal with the part month values

As the first Invoice here is the request form

The first Journal entry for the part month will only cover the first 8 days, this will be followed by 11 fixed months, and a part month to complete, this will be eight lines, and as you can see all dimensions are copied from the original line.