I am having a difficult time dealing wioth deferred revenue. I work for a newsletter company who has customers with subscriptions. Therefore, when I make a sale, I wouldl like to be able to to credit deferred revenue as a liability. It seems simply accounting will only let me credit revenue accounts though through the inventory module.. How should I set this up?
Thank you so much to anyone who has the time to answer this query.
Lost in accounting world.
Hi there: There are many different ways to record Revenue. Do you even use the Inventory module? If not, then don't worry about trying to record revenue through that module.
When you go into the Sales window to record a sales invoice, just choose the Deferred Revenue account as the account number to post the entry to. Rita Deering
Thanks Rita. Is there anyway to automatically setup Deferred Revenue in the sales window? Right now it is so easy using the inventory window (although it evidently posts to the wrong account!)
Hi there: If you do not have inventory, using the inventory window to do anything is INCORRECT. You should be using the Accounts Receivable module, Sales window to be recording your sales regardless of which account you post the Sales to. Although are you actually recording a Sale as Accounts Receivable and then recording the receipt from the customer as a separate step?
In the customer's account in the Customers window when you set the customer up, there is a box where you can choose the account number to record the sale to. You would have to do this for every customer. If ALL your customers need to have revenue posted to the Deferred Revenue account, then it is fairly simple to go into each one and put that account number in. If they are not consistent you might want to just type in the account number you need each time. Rita Deering
I have been using the a/r window and then selecting the "inventory" for each type of subscription. So what I am hearing you say is that subscriptions are not classified as inventory at all and I can't use that system?
Should I be selecting a Derred Revenue Account (Liability) for each transaction and then just manually typing in the type of subscription the customer bought instead of using inventory?
Also what should I do with all of the transactions that have already been posted?? I can do a big journal entry moving the exisiting liablity to a liability account from the revenue account:
ie. dr. 4150 Deferred Revenue
cr. 2450 Deferred Revenue
Then what should I do?
Thank you so much for your help!!
Hi there: Maybe I am giving you wrong information. I was not thinking of subscriptions as being "inventory". However, since you have many different kinds of subscriptions (I am assuming) and you want to separate and categorize them, I guess you could use the inventory module. I have never used it so am totally unfamiliar with the process the program goes through when using the Inventory module. I wouldn't change anything you are doing if you prefer to use the inventory module and it works for keeping track of whatever you need to keep track of.
However, you still have your original question of wanting the entries to be posted to a Deferred Revenue (Liability) account 2450. If all your entries have been going into a Deferred Revenue account 4150 then the balance in that 4150 account is NOT a liability but Revenue and is showing on your Income Statement as such. Are you saying that you don't want that revenue on the Income Statement but want it to show on the Balance Sheet as a Liability in account 2450 and then you reallocate amounts from there to Sales as each month goes by? Is that what you want to do? Rita Deering
I am sorry for the confusion.
These subscriptions should not be recognized as revenue. I keep track of the revenue that has actually been earned on an excel spreadsheet and then I reduce the deferred revenue by the amount earned every month. Unfortunately, I have been posting to the deferred revenue 4150 thinking it was a liability account - i realize now it is not... So yes you are correct, I do not want to recognize the revenue - it is still a liability. And yes, I want to recognize it on a month-by-month basis.
Hope that helps.
Hi again: Yes, that definitely helps and your question about moving the amounts from account 4150 to the liability account number instead is correct. Move all of it, or some of it, or whatever amount of it needs to be moved. And in the future, if you can just pick the liability number when posting the entry, or have it set up to just be there as I suggested in a previous post, then you will have your amounts going to the right account. Using the inventory module for what you are doing really threw me off as I have never thought about using that module for anything other than manufacturing or parts inventory and so on. You were on the right track by yourself anyway. Have a good day. Rita
I would just like to say thank you for clarifying this for me. I really appreciate it.
Hi again: Your welcome!
I hope you are still around in this forum - I need your help again! I did the transaction as you suggested: debiting the revenue account and crediting the liability account to trasfer the deferred revenue to become a liability. I used the exact amount that was in the revenue account. However, on my chart of accounts everything is fine - ie. 4000 account revenue is $0; however, when I go to generate a B/S as of today, it says my deferred revenue is $-627.62 !! Please help! What is going on?
I apologize Rita - it was a date issue. Thanks though.
© 2015, Sage Software, Inc. All Rights Reserved. Sage provides small and medium sized organizations and mid-market companies with a range of easy-to-use, secure and efficient
business management software and services - from accounting, HR and payroll, to payments, enterprise resource planning and customer relationship management.
Community Terms of Service | Community Guidelines | Blog List | Community Help