Recognized Revenue

What is Recognized Revenue - Time?

Recognized Revenue - Time represents revenue earned from time-based subscriptions as the subscription period progresses. When you first invoice a customer for an annual or monthly subscription, the revenue is "deferred" (you haven't earned it yet). As time passes and you deliver the service, that deferred revenue gradually becomes "recognized" (earned) revenue.

This appears when: You have active subscriptions where revenue recognition is based on time elapsed (the most common type).

Affects:

Deferred Revenue: Decreases (positive adjustment, reducing the liability)
Recognized Revenue: Increases (negative value, representing income earned)

How Time-Based Recognition Works

The Basic Concept

Think of it like a magazine subscription:

Customer pays $120 for 12 months upfront
You owe them 12 months of magazines (Deferred Revenue: -$120)
Each month you deliver 1 magazine (Recognized Revenue: -$10 per month)
After 12 months, you've earned all $120

The Calculation Formula

Revenue Recognized = (Time Consumed / Total Period Length) × Deferred Revenue Amount

Example - $1,200 Annual Subscription:

Period: January 1 to December 31 (365 days)
By end of January: 31 days consumed out of 365 days
Revenue recognized in January: (31/365) × $1,200 = $101.92

Real-World Examples

Example 1 - Monthly Subscription:

Customer subscribes on October 15 for $30/month
October report (Oct 15-31): 16 days out of 30 days
Revenue recognized: (16/30) × $30 = $16
Remaining deferred: $14 (will be recognized in November)

Example 2 - Annual Subscription:

Customer pays $1,200 on January 1 for full year
Each month recognizes: $1,200 / 12 = $100
After 6 months: $600 recognized, $600 still deferred

Example 3 - Subscription Canceled Mid-Period:

Customer cancels $120 annual subscription after 3 months
Revenue recognized through cancellation: (90/365) × $120 = $29.59
Remaining deferred revenue may be refunded or recognized depending on terms

Subscriptions Included

A subscription appears in "Recognized Revenue - Time" when ALL of the following are true:

Time-based recognition: Plan's revenue recognition type is "time-based" or not specifically set to shipment-based
Active subscription: Subscription hasn't ended before the start of the month
Period overlap: Subscription period overlaps with the selected month
Not gift donor: Regular subscriptions (gift donor subscriptions handled separately)
Not deleted: Invoice not deleted
Correct account and currency: Matches selected account and currency

Columns Affected

Column	Effect	Sign	What It Means
Deferred Revenue	Decreases	Positive (+)	Liability decreasing as service is delivered
Recognized Revenue	Increases	Negative (-)	Income earned and recognized

Deferred Revenue

What Does This Number Mean?

Deferred Revenue in this row shows how much of the liability is being reduced as you deliver service over time.

Think of it as: "Service obligation being fulfilled"

The Exact Calculation

For each eligible subscription:
  Calculate: Time consumed this month / Total subscription period length
  Multiply by: Invoice amount (excluding tax)
  Adjust for: Any credit notes issued

Result is shown as a POSITIVE number (liability decreasing)

Example:

Annual subscription: $1,200 (excluding tax)
January: 31 days out of 365 days = 8.49% consumed
Deferred Revenue adjustment: +$101.92 (liability decreases by this amount)

Why Is This Number Positive?

When deferred revenue appears as positive in this row, it means the liability is decreasing. You're fulfilling your obligation to deliver service, so you owe less than before.

Recognized Revenue

What Does This Number Mean?

Recognized Revenue shows the income you've earned by delivering service during this month. This is revenue moving from "deferred" (not yet earned) to "recognized" (earned and can be reported as income).

Think of it as: "Income we've earned this month"

The Exact Calculation

Recognized Revenue = -1 × Deferred Revenue change

Result is shown as a NEGATIVE number (income earned)

The recognized revenue is always the negative mirror of the deferred revenue change. Whatever liability decreases becomes income earned.

Why Is This Number Negative?

In accounting reports, income is shown as negative numbers. The more negative this number, the more revenue you've earned. This follows standard accounting conventions where income statement accounts have opposite signs from balance sheet accounts.

Common Questions

How is time consumption calculated?

Time consumption is calculated in seconds:

Consumed Seconds This Month / Total Period Length in Seconds

The system tracks exactly how many seconds have elapsed in the subscription period and calculates the proportional revenue to recognize.

What happens if a subscription is canceled mid-month?

Revenue is recognized up to the cancellation date. The system calculates days (or seconds) consumed until cancellation and recognizes that proportion of revenue.

Do credit notes affect recognition?

Yes. Credit notes issued during the month adjust the revenue recognition calculation. The system accounts for credits issued both in previous periods and the current period.

Why is my recognized revenue different from my invoice amount?

Recognized revenue is proportional to time elapsed, not invoice amount. A $1,200 annual invoice recognizes approximately $100 per month, not $1,200 in the first month.

What if a subscription period spans multiple months?

The subscription appears in every month its period overlaps. Each month recognizes only the portion of revenue corresponding to time elapsed within that specific month.

How does this handle leap years?

The system uses actual seconds elapsed, so leap years with 366 days are automatically handled correctly. February will recognize 29/366 instead of 28/365.

Are taxes recognized over time too?

No. Taxes are a separate liability and don't appear in revenue recognition rows. Only the subscription amount (excluding tax) is recognized as revenue.

Can I see which subscriptions had revenue recognized?

Yes! If you have the appropriate permissions, there's a download icon next to this row that lets you export detailed transaction data.

Summary

Quick Reference:

What appears here: Revenue earned from time-based subscriptions as service is delivered over time

Inclusion criteria:

Time-based subscription (not shipment-based)
Subscription period overlaps with selected month
Not ended before month start
Not deleted
Correct account and currency

Columns:

Deferred Revenue: Positive (liability decreasing)
Recognized Revenue: Negative (income earned)

Recognition formula: (Time Consumed / Period Length) × Invoice Amount (ex. tax)