Deretoo – Under the Hood

Deretoo – Under the Hood

Revenue recognition is an accounting process for recording revenue over the term of a contract as the revenue is ‘earned’ (recognized). Deretoo replicates the following steps you may be currently using with a spreadsheet.

  • Subscription or maintenance items in QuickBooks® are created with start date and end date.
  • Subscription or maintenance items are associated with a short term liability account (usually named Deposits, Deferred Revenue, Retainer, or Pre-Payments).
  • Deretoo spreads recognition of the maintenance item into equal installments for the life of the contract.
  • Each month’s recognized revenue is entered as a General Journal entry by Deretoo

Let’s walk through an example…

Maintenance items – are set as a Service and are associated with the account Deposits (a short term liability).

Custom fields for Start date and End date are added to the items table.

Invoices are entered.

Note: The invoices do not show up on the Profit and Loss report, since the income is not yet recognized. DeReToo spreads the income transaction over the life of the contract.

Contract Oct Nov Dec Jan Feb Mar Apr
Whitehall
10/1/2011-3/1/2012		 833.33 833.33 833.33 833.33 833.33 833.35 0
Jameson
1/1/2012-7/1/2013		 120 120 120 120
Total for GJ 833.33 833.33 833.33 953.33 953.33 953.33

At the end of each month, DeReTo will post a single GJ entry to QuickBooks®, looking something like this:

Date: 10/31/2011   Entry No: DRT20120100
Account Debit Credit
Deposits 833.33
Maintenance Sales 833.33

Additional reporting and other features are also included, but this is the core function