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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
Navigate to Reports → Revenue Recognition
Select the time period
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:
Remaining deferred revenue from old plan is adjusted
New revenue schedule created for the upgrade
Proration creates incremental revenue items
Cancellations When a subscription is canceled:
Remaining deferred revenue is reversed (if refunding)
Or recognized immediately (if no refund)
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
Navigate to Settings → Integrations
Connect QuickBooks, Xero, or NetSuite
Revenue entries sync automatically
Manual Export
Navigate to Reports → Revenue Recognition
Select the period
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:
Navigate to Products → [Product]
Under Revenue Recognition :
Set recognition method
Set timing (service start, invoice date)
Save
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.
Next Steps
Accounting Integration Sync with your accounting system.
Reports View revenue dashboards.
