> ## Documentation Index
> Fetch the complete documentation index at: https://alguna.com/docs/llms.txt
> Use this file to discover all available pages before exploring further.
# Revenue Recognition
> ASC 606 and IFRS 15 compliant revenue recognition
# 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.
***
## 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) |
***
## 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 |
***
## Viewing Revenue Schedules
### In the Dashboard
1. Navigate to **Reports → 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** |
***
## Deferred Revenue
Deferred revenue (also called unearned revenue) represents cash you've collected but haven't yet earned.
### Deferred Revenue Report
Navigate to **Reports → Deferred Revenue** to see your balance:
| As of Date | Total Deferred | Due in 30 Days | Due in 60 Days | Due 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 |
| ... | ... |
***
## 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 |
***
## Multi-Currency Revenue
For subscriptions billed in foreign currencies, revenue is recognized in your functional (reporting) currency.
### How FX Is Handled
| Setting | Description |
| ----------------------- | ----------------------------------- |
| **Invoice Currency** | Customer's currency (e.g., EUR) |
| **Functional Currency** | Your reporting currency (e.g., USD) |
| **FX Rate Locked** | At invoice date (configurable) |
### Example: EUR Invoice with USD Reporting
| | EUR | USD (at 1.10 rate) |
| ------------------- | ------ | ------------------ |
| Invoice Amount | €1,000 | \$1,100 |
| Monthly Recognition | €83.33 | \$91.67 |
***
## Revenue Reports
### Monthly Revenue Report
Navigate to **Reports → Revenue** 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 |
***
## 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.
***
## 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 **Reports → Revenue Recognition**
2. Select the period
3. Click **Export** to download CSV
***
## Configuration
### Recognition Method
Configure in **Settings → Revenue Recognition**:
| Method | When to Use |
| ----------------- | ---------------------------------------------- |
| **Straight-line** | Recognize evenly over service period (default) |
| **Usage-based** | Recognize as usage occurs |
| **Point-in-time** | Recognize immediately (setup fees) |
### Product-Level Settings
Override the default method for specific products:
1. Navigate to **Products → \[Product]**
2. Under **Revenue Recognition**:
* Set recognition method
* Set timing (service start, invoice date)
3. Save
***
## Best Practices
Run revenue recognition before monthly close.
All changes are tracked with full audit history.
Reconcile deferred revenue to your general ledger monthly.
Lock FX rates at invoice date for consistency.
***
## Next Steps
Sync with your accounting system.
View revenue dashboards.