How do I recognize deferred revenue for client invoiced annually so it shows up in the P&L Report? Currently is being reported back to date of original annual invoice.

Thank you for the help it will definitely me get closer to fixing this.

When payment are received they are entered as sales receipt to deferred revenue.

So the linked income account of the Item is deferred revenue. What account type is this? C/liab? 

• Correct, deferred revenue is set as a liability.

"As services are rendered monthly we do credit memo to the original invoice to realize the revenue. "  c/memo does not create revenue; it reduces it. And it creates a negative AR balance, which s/be zero. There is no AR

• I probably explained that poorly. I was using the Credit Memo to reduce the Deferred Revenue
• Then applying that same credit memo as a payment to the original invoice (which has an item linked to income account) to reduce the invoice balance.

 You created an Invoice, you must receive payment against the invoice or the invoice remains open. Unpaid invoices in cash basis accounting are not yet income until paid. So no matter what you do outside the invoice, if you do not "pay" the invoice you do not record the income item in the invoice.

• Correct, which is why I was applying the Credit Memo to the original invoice as a payment

 Are you clearing Deferred Revenue with the credit memo each month?   

• Yes, we are clearing Deferred Revenue with the credit memo each month

Only a payment on the invoice will record income as of the date of the payment. Credit memos will not do that. 

• That is why was applying the Credit Memo to the original invoice as a payment, however, I thought that the amount would show up in the P&L for the date of that payment. If I understand correct, I see that the payment is technically $0 which is probably why the amount then shows up in the P&L as the date of original invoice. Which is what I am trying to fix.

What does services monthly even mean when you have an annual invoice? Yes, you billed the customer in advance for a year's worth of services not yet performed, however you , as described, do not receive any money until the year is over?

• Sorry, I probably didn’t explain that part well. Clients are paying for an entire year up front for services to be provided on a monthly basis.

 Where is your payment in this? Up front? THAT is a different animal altogether

• Yes, our payment is upfront or a prepayment for services not yet provided.

My recommendation is to use an Estimate and Progress Billing month by month.

• Do clients typically pay from an estimate though? I’ve only ever been asked specifically for invoices.
• If I do need an invoice for the client to pay, once created, I wouldn’t want to delete something I already sent to a client would I?

We are looking at our P&L as accrual which is why I was hoping to see the credit memo’s/payments applied on a monthly basis for the date I processed those rather than attached to the original invoice.

I am going to test out both of your suggested options to see if one of them will work for us!  What I failed to mention in my original post is that we are using Quickbooks Online which I know is far more limited than the Desktop version.  Just curious if knowing this would change any of your suggestions.