Revenue Recognition

ASC 606 and IFRS 15 compliant revenue recognition

Alguna automates revenue recognition to help you comply with ASC 606 and IFRS 15 accounting standards. Revenue is recognized over the service period, not when cash is received.

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How Revenue Recognition Works

When you bill a customer upfront for a service period, you don’t earn all that revenue immediately. Instead, revenue is recognized (earned) as you deliver the service over time.

When	What Happens
Invoice Issued	Customer is billed, creates Accounts Receivable and Deferred Revenue
Each Month	Portion of Deferred Revenue moves to Recognized Revenue
Payment Received	Cash replaces Accounts Receivable (no revenue impact)

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Revenue Recognition Timing

Subscription Revenue

Revenue is recognized evenly over the service period:

Billing Type	Service Period	How Revenue Is Recognized
Annual upfront ($1,200)	12 months	$100 per month
Quarterly upfront ($300)	3 months	$100 per month
Monthly ($100)	1 month	$100 in the month

Example: $1,200 Annual Subscription Starting January 1

Month	Revenue Recognized	Cumulative Recognized	Remaining Deferred
January	$100	$100	$1,100
February	$100	$200	$1,000
March	$100	$300	$900
April	$100	$400	$800
…	…	…	…
December	$100	$1,200	$0

Usage-Based Revenue

Usage revenue is recognized when usage occurs—no deferral needed.

Month	Usage	Rate	Revenue Recognized
January	10,000 API calls	$0.01/call	$100
February	15,000 API calls	$0.01/call	$150
March	8,000 API calls	$0.01/call	$80

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Viewing Revenue Schedules

In the Dashboard

1. Navigate to Revenue Recognition
2. Select the time period
3. View:
   • Recognized revenue by period
   • Deferred revenue balance
   • Revenue by product or customer

Revenue Schedule Example

For a $1,200 annual subscription billed January 1:

Subscription	Customer	Total Amount	Recognized (Q1)	Deferred (as of Mar 31)
SUB-001	Acme Corp	$1,200	$300	$900
SUB-002	Globex Inc	$2,400	$600	$1,800
SUB-003	TechStart	$600	$150	$450
Total		$4,200	$1,050	$3,150

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Deferred Revenue

Deferred revenue (also called unearned revenue) is the amount you have billed but not yet earned. It arises when the invoice is issued, not when the cash arrives, and it is drawn down as you deliver the service.

Deferred Revenue Report

Open Revenue Recognition to see your deferred revenue balance:

As of Date	Total Deferred	To recognize in 30 days	In 60 days	In 90+ days
Mar 31, 2024	$450,000	$50,000	$48,000	$352,000

Deferred Revenue by Period

Recognition Month	Amount to Recognize
April 2024	$50,000
May 2024	$48,000
June 2024	$47,000
July 2024	$45,000
…	…

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Journal Entries

Alguna automatically generates the accounting entries for revenue recognition.

When Invoice Is Issued

Account	Debit	Credit
Accounts Receivable	$1,200
Deferred Revenue		$1,200

Monthly Recognition (Each Month)

Account	Debit	Credit
Deferred Revenue	$100
Revenue		$100

When Payment Is Received

Account	Debit	Credit
Cash	$1,200
Accounts Receivable		$1,200

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Multi-Currency Revenue

A subscription is billed in the customer’s currency. For reporting across entities, amounts are converted using the FX rates you maintain per legal entity.

How FX Is Handled

	Description
Invoice currency	The customer’s currency, for example EUR
Reporting currency	The target currency on the FX rate for the legal entity, for example USD
Rate used	The rate whose validity period covers the recognition period, so historical periods keep the rate that applied at the time

Maintain rates under Settings → Billing → FX Rates. See Multi-Currency.

Example: EUR Invoice with USD Reporting

	EUR	USD (at 1.10 rate)
Invoice Amount	€1,000	$1,100
Monthly Recognition	€83.33	$91.67

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Revenue Reports

Monthly Revenue Report

Open Revenue Insights to view:

Product	Recognized Revenue	% of Total
Platform Pro	$80,000	64%
Premium Support	$35,000	28%
Implementation	$10,000	8%
Total	$125,000	100%

Revenue by Customer

Customer	MRR	Recognized This Month
Acme Corp	$5,000	$5,000
Globex Inc	$3,500	$3,500
TechStart	$2,000	$2,000

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Handling Changes

Subscription Upgrades

When a customer upgrades mid-period:

1. Remaining deferred revenue from old plan is adjusted
2. New revenue schedule created for the upgrade
3. Proration creates incremental revenue items

Cancellations

When a subscription is canceled:

1. Remaining deferred revenue is reversed (if refunding)
2. Or recognized immediately (if no refund)
3. Final journal entries are generated

Amendments

Mid-term changes create amendment revenue schedules that align with the original schedule dates.

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Exporting Revenue Data

Export to Accounting System

1. Navigate to Settings → Integrations
2. Connect QuickBooks, Xero, or NetSuite
3. Revenue entries sync automatically

Manual Export

1. Navigate to Revenue Recognition
2. Select the period
3. Click Export to download CSV

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Configuration

Recognition Method

The recognition method is set per product, so a contract can mix methods across its line items.

Method	Behaviour	When to use
Straight-line	Equal allocation per period within each billing cycle. The default.	Most subscription revenue
Usage-based	Allocated in proportion to metered usage in each period	Consumption revenue, under the ASC 606 variable-consideration guidance
Contract-level straight-line	Total contract value spread evenly across the whole contract, ignoring per-period price differences	Promotional pricing and annual escalators, where per-period pricing does not reflect delivery

Set it on the product, or through revenue_allocation_method on the products API.

Product-Level Settings

Set the method per product:

1. Navigate to Products → [Product]
2. Under Revenue Recognition:
   • Set recognition method
   • Set timing (service start, invoice date)
3. Save

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Best Practices

Monthly Close

Run revenue recognition before monthly close.

Audit Trail

All changes are tracked with full audit history.

Reconciliation

Reconcile deferred revenue to your general ledger monthly.

Multi-Currency

Lock FX rates at invoice date for consistency.

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Next Steps

Accounting Integration

Sync with your accounting system.

Reports

View revenue dashboards.