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