Set up a revenue recognition schedule in QuickBooks Online Advanced

Set up revenue recognition to automatically schedule moving revenue from your chosen liability account to your chosen asset account. You can then take advantage of revenue reporting.

Step 1: Turn on revenue recognition

1. Go to Settings , then select Account and settings.
2. Select Sales. 
3. In Products and services, select Edit ✎.
4. Turn on Revenue recognition.
5. Select the Frequency: Daily or Monthly.
6. Select Save, then Done.

Step 2: Add a service with revenue recognition 

1. Go to Settings , then Products & services (Take me there). 
2. Select New, then choose Service. 
3. Fill out the details. 
4. Check I recognize revenue for this product monthly. 
5. 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.  
6. Select Save and close.

Step 3: 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.

1. Go to New, and select Invoice. 
2. Fill out your invoice details. Be sure to add the service you just created. 
3. Under Service Date, choose the date this service will start.
   The service date can be after the close books date. 
4. Select Save. 
5. Next to the service line item, select View Revenue Recognition. 
6. The schedule for your revenue recognition for that service displays.

QuickBooks Online automatically updates your revenue recognition schedule after you add a service with revenue recognition and create an invoice or sales receipt with revenue recognition. You can edit and customize your revenue recognition schedule, too. For example, adjust the service duration period for an item at a transaction level, adjust an entire schedule, or make changes to an item’s price. Each time you make changes, your revenue recognition schedule automatically adjusts.

Edit a service item’s duration at the transaction level

1. Go to Sales, then Invoices (Take me there).
2. Open an existing invoice that has the service item, or select Create invoice.
3. Fill out your invoice, including:
   • The name of service under Product/Service.
   • The date the service starts under Service date. The service date can be after the close books date.
4. When you’re done filling out your invoice, select Save.
5. Select the View Revenue Recognition link.
6. In the Revenue Recognition panel, select Edit.
7. In the Service Duration field, enter a new period for your schedule. The duration of the service must be:
   • Greater than the duration of posted entries.
   • Less than 5 years.
     Note: You can only edit posted entries that occur after the close books date.
8. Review or revise your automatically-updated schedule, then select Apply.

Edit a service item’s schedule at the transaction level

1. Go to Sales, then Invoices (Take me there).
2. Open an existing invoice that has the service item, or select Create invoice.
3. Fill out your invoice, including:
   • The name of service under Product/Service.
   • The date the service starts under Service date. The service date can be after the close books date.
4. When you’re done filling out your invoice, select Save.
5. Select the View Revenue Recognition link.
6. In the Revenue Recognition panel, select Edit.
7. In the Amount recognized column, change one or more values in the current schedule as long as it occurs after the close books date set under accounts and settings.
   Note: The schedule auto balances for open, unedited months.
8. Review or revise your automatically-updated schedule, then select Apply.

Edit a service item’s price at the transaction level

1. Go to Sales, then Invoices (Take me there).
2. Open an existing invoice that has the service item, or select Create invoice.
3. Fill out your invoice, including:
   • The name of service under Product/Service.
   • The date the service starts under Service date. The service date can be after the close books date.
4. Under Rate, enter a new price.
5. When you’re done filling out your invoice, select Save. 
6. Select the View Revenue Recognition link.
7. In the Revenue Recognition panel, select Edit to review your changes. Take note of the following:
   • A new price higher than the original price automatically increases recognition amounts for future open months.
   • A new price lower than the original price, but still higher than the total amount recognized until now, reduces recognition amounts for future open months.
   • A new price lower than the total amount recognized until now, automatically shows a negative recognition amount in the current month.
     Note: To remove negative recognition amounts, manually adjust the amounts from the Revenue Recognition panel.
8. Select Apply.

You can close or adjust an existing schedule and then issue a credit memo or a refund receipt. For example, let’s say you’ve already recognized US $200.00 for the service, but you want to issue a complete refund for US $1200.00.

1. Go to Sales, then Invoices (Take me there).
2. Open an existing invoice.
3. Select the View Revenue Recognition link.
4. In the Revenue Recognition panel, select Edit.
5. In the Schedule section, do one of the following actions:
   • Recognize now: You can stop all future revenue recognition entries for the item by recognizing all the remaining unrecognized amount in the current open month. In other words, post an amount to the entry so that the income account matches the total price of the item to close out a schedule.
     Note: Remember, in this example, you've already recognized US $200.00 for the service, so you need to post US $1,000. That way, the income account will total US $1200.00. You also need to verify, in this example, that all future entries are zero amounts. When you issue a credit memo for US $1200, all the income is reversed. When you issue a credit memo of US $500, only US $500 of the income is reversed.
   • Keep the schedule as it is.
   • Customize the schedule for your needs.
6. Select Apply.
7. Create and issue a credit memo or a refund receipt.