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 and select Account and settings.
2. Select Sales. 
3. In Products and services, select Edit ✎.
4. Turn on Revenue recognition.
5. Select Save and then Done.

Step 2: Manage and create templates

Use pre-built templates or create your own templates to customise revenue recognition methods, frequency, and period. Then, assign a template to your services.

1. Go to Advanced accounting and select Revenue recognition.
2. If this is your first time visiting this page, select Get started. Otherwise, select Manage settings then Manage templates.
3. You’ll see several pre-built templates, which you can apply to your product and services. This determines the revenue recognition method, frequency revenue is recognised, and the number of periods in which revenue is recognised when the designated item is added to an invoice. To create a new template, select Add new template.
4. Enter a name for this template, then use the Recognition settings dropdown to choose one of the following options:
   • Straight-line, even across periods: Then choose the recognition frequency, and the recognition period in months.
   • Straight-line, prorated by days: Then choose the recognition frequency, and the recognition period in months, quarters, or years.
5. When finished, select Save.

Step 3: Assign templates to products and services

Now that you’ve setup your revenue recognition template, assign the template to a product/service. Afterwards, you can add the service to an invoice.

1. From the Manage templates tab, go to the Assign product/service tab.
2. Select Assign template to products/services.
3. In the Products/service dropdown, choose a service item, or add a new one.
4. In the Revenue recognition template dropdown, choose either a standard template, or one you created.
5. In the Liability account dropdown, choose a liability account, or add a new one.
6. When finished, select Save.

Once saved, you can change the income account or a service item, or delete a template, as needed.

Step 4: Create an invoice or sales receipt with revenue recognition

Now, create an invoice or sales receipt 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. Select + New, then select Invoice or Sales receipt.
2. Fill out your invoice or receipt 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. Select the View Revenue Recognition link for the service item. The revenue recognition schedule 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 customise 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 and select 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 and select Invoices (Take me there).
2. Open an existing invoice with the service item to edit it, or select Create invoice.
3. Fill out your invoice, including:
   • The name of the 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 Recognised 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 and select Invoices (Take me there).
2. Open an existing invoice with the service item to edit it, or select Create invoice.
3. Fill out your invoice, including:
   • The name of the 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. Review or revise your automatically updated schedule. To make changes, select Edit.
   Note:
   • 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 recognised until now, reduces recognition amounts for future open months.
   • A new price lower than the total amount recognised until now, automatically shows a negative recognition amount in the current month.
   • 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 note or a refund receipt. For example, let’s say you’ve already recognised R200.00 for the service, but you want to issue a complete refund for R1200.00.

1. Go to Sales and select Invoices (Take me there).
2. Open an existing invoice to edit it.
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:
   • Recognise now: This is available under More actions . You can stop all future revenue recognition entries for the item by recognising all the remaining unrecognised 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 recognised R200.00 for the service, so you need to post R1,000. That way, the income account will total R1200.00. You also need to verify, in this example, that all future entries are zero amounts. When you issue a credit note for R1200, all the income is reversed. When you issue a credit note of R500, only R500 of the income is reversed.
   • Keep the schedule as it is.
   • Customise the schedule for your needs.
6. Select Apply.
7. Create and issue a credit note or a refund receipt.