Learn how to set up an automatic schedule to help with revenue recognition in QuickBooks Online Advanced.
Revenue Recognition is a generally accepted accounting principle (GAAP) that defines how and when you recognize revenue. For all businesses on an accrual basis, revenue is recognized when it’s earned, not when money is exchanged. A common scenario for this is a pre-paid or subscription service.
Set up revenue recognition to automatically schedule moving revenue from your chosen liability account to your chosen asset account.
Turn on revenue recognition
- Go to Settings ⚙, then Account and settings.
- Select Sales.
- In Products and services, select Edit ✎.
- Turn on Revenue recognition.
- Select Save, then Done.
Note: Currently, revenue can only be recognized on a monthly basis.
Add a service with revenue recognition
- Go to Sales & expenses, then Products & services.
- Select New, then choose Service.
- Fill out the details.
- Check I recognize revenue for this product monthly.
- Choose a Liability account and, in Service Duration, enter the number of months the revenue should be recognized over.
Note: You can enter up to 60 months.
- Select Save and close.
Create an invoice with revenue recognition
Now, create an invoice for this service you just set up. The Service Date on the invoice will let QuickBooks know when to start the revenue recognition schedule.
- Go to New, and select Invoice.
- Fill out your invoice details. Be sure to add the service you just created.
- Under Service Date, choose the date this service will start.
Note: The service date can be in the current calendar month or a future calendar month.
- Select Save.
- Next to the service line item, select View Revenue Recognition.
- The schedule for your revenue recognition for that service displays.