---
updatedAt: 2026-04-09T13:42:46.000Z
agentTools:
  projectIndex: https://docs.pelcro.com/v2.4/llms.txt
---

# Recognized Revenue - Shipments

Revenue recognized based on issues/shipments delivered - how deferred revenue becomes earned revenue as you fulfill and ship products to customers.

## What is Recognized Revenue - Shipments?

Use this page to understand how shipment approvals turn deferred revenue into recognized revenue for shipment-based subscriptions.

**Recognized Revenue - Shipments** represents revenue earned from shipment-based subscriptions as issues or shipments are delivered to customers. Unlike time-based subscriptions, these subscriptions earn revenue when you fulfill specific deliverables (like magazine issues, newsletters, or product shipments) rather than as time passes.

This appears when: You have shipment-based subscriptions (configured with `shipments_per_interval > 0`) and you deliver/approve those shipments.

**Affects:**

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

***

## How Shipment-Based Recognition Works

### The Basic Concept

Think of it like a magazine subscription with 12 issues:

* Customer pays $120 for 12 issues upfront
* You owe them 12 magazines (Deferred Revenue: -$120)
* Each time you ship an issue, you earn 1/12 of the revenue (Recognized Revenue: -$10 per issue)
* After delivering all 12 issues, you've earned all $120

### The Calculation Formula

Revenue is recognized by applying the fulfillment ratio to the net invoice amount (excluding tax):

```
Revenue Recognized = (Shipments Fulfilled in Period / Shipments Per Period) × (Invoice Total - Tax)
```

**Example – 12-Issue Annual Subscription:**

* Subscription: $120 for 12 issues
* January: Delivered issues #1 and #2
* Revenue recognized in January: (2/12) × $120 = $20

### How Shipments Are Counted

The system tracks three distinct shipment states to handle mid-cycle changes and cancellations accurately:

| State                 | Description                                                                                     |
| --------------------- | ----------------------------------------------------------------------------------------------- |
| **Total Consumed**    | All shipments approved from the start of the billing period to the end of the reporting month.  |
| **Period Specific**   | Shipments approved strictly within the current reporting month's boundaries.                    |
| **Historical Offset** | Shipments approved prior to the current month — used to prevent double-counting across periods. |

### Period Boundary Rule

A shipment **only triggers revenue recognition** if its approval date falls **within the active invoice period**:

```
period_start ≤ approved_at ≤ period_end
```

Shipments approved outside this window are treated as follows:

| Shipment State     | Condition                                 | Financial Impact                                                                                           |
| ------------------ | ----------------------------------------- | ---------------------------------------------------------------------------------------------------------- |
| **Early Approval** | `approved_at < period_start`              | $0 — considered pre-cycle; does not deplete the current invoice's deferred balance.                        |
| **Late Approval**  | `approved_at > period_end`                | $0 — considered post-cycle; may decrement shipments remaining but earns no revenue from an expired period. |
| **Within Period**  | `period_start ≤ approved_at ≤ period_end` | Recognized — shipment ratio is calculated and proportional revenue moves to the P\&L.                      |

***

## How Shipments Are Tracked

### Approval Workflow

When an administrator approves a fulfillment batch:

1. The shipment's `approved_at` timestamp is recorded.
2. `subscription.shipments_remaining` is decremented.
3. An audit trail entry is created.
4. On the next scheduled accounting run, approved shipments are picked up and proportional revenue moves from Deferred to Recognized on the P\&L.

### Counting Logic

The system counts **distinct approved shipments** where:

* Approval date falls within the subscription's active billing period
* Approval date is within or before the reporting month
* Subscription is active (not ended or deleted)

***

## Subscriptions Included

A subscription appears in **Recognized Revenue – Shipments** when **all** of the following are true:

1. **Shipment-based plan** — plan has `shipments_per_interval > 0`
2. **Configured for shipments** — plan's `recognized_revenue_type` is set to `"shipments"`
3. **Shipments approved** — one or more shipments were approved during the selected month
4. **Active subscription** — subscription hasn't ended before the start of the month
5. **Period overlap** — subscription period overlaps with the selected month
6. **Not deleted** — invoice not deleted
7. **Correct account and currency** — matches selected account and currency

## Real-World Examples

**Example 1 – Monthly Magazine (1 issue/month):**

* Customer pays $120 for 12 months (12 issues)
* January: Issue #1 shipped and approved
* Revenue recognized: (1/12) × $120 = $10
* Remaining deferred: $110 (11 issues still owed)

**Example 2 – Weekly Newsletter (4 issues/month):**

* Customer pays $40 for 1 month (4 newsletters)
* Week 1: Newsletter #1 sent; Week 2: Newsletter #2 sent
* After 2 weeks: (2/4) × $40 = $20 recognized
* Remaining deferred: $20 (2 newsletters still owed)

**Example 3 – Quarterly Publication (4 issues/year):**

* Customer pays $100 for full year (4 quarterly issues)
* Q1: Issue #1 delivered
* Revenue recognized in Q1: (1/4) × $100 = $25
* Remaining deferred: $75 (3 issues still owed)

**Example 4 – Subscription Canceled After 3 Issues:**

* Original: $120 for 12 issues
* After 3 issues delivered: $30 recognized
* Cancel and refund remaining: $90 refunded or written off

***

## Advanced Financial Handling

### Credit Notes

Credit notes adjust recognized revenue depending on when they were issued:

* **Current period credit notes:** Only the unrecognized portion reduces the deferred revenue balance.
* **Previous period credit notes:** These reduce the revenue base *before* the shipment ratio is applied, ensuring historical refunds are correctly factored into current earnings.

### Edge Case: Mid-Month Cancellations

If a subscription is deleted or canceled mid-month, the system recognizes the **entire remaining unrecognized balance** (invoice amount minus previously recognized amounts and any credit notes). This ensures no liability remains on the books for an ended obligation.

### Edge Case: Gift Subscriptions

| Role                          | Behavior                                                                                              |
| ----------------------------- | ----------------------------------------------------------------------------------------------------- |
| **Donor**                     | Recognition is always $0 — revenue is recognized on the recipient side.                               |
| **Recipient (100% discount)** | Calculation uses `invoice_subtotal` instead of `invoice_total` to correctly value the earned service. |

***

## Accounting Columns Affected

| Column                 | Effect    | Sign         | What It Means                                 |
| ---------------------- | --------- | ------------ | --------------------------------------------- |
| **Deferred Revenue**   | Decreases | Positive (+) | Liability decreasing as issues are delivered. |
| **Recognized Revenue** | Increases | Negative (−) | Income earned from fulfilled shipments.       |

> **Why negative?** In standard accounting, income is recorded as a negative number on reports. The more negative this value, the more revenue you've earned. Recognized Revenue is always the negative mirror of the Deferred Revenue change.

***

## Common Questions

**What counts as a "shipment"?**
Any deliverable unit defined by your plan — magazine issue, newsletter, product batch, digital content release, etc.

**What if I deliver multiple issues in one month?**
Each approved shipment counts individually. Delivering 3 issues in January for a 12-issue subscription recognizes 3/12 = 25% of the revenue.

**Can I recognize more than 100% of a subscription?**
No. The system caps recognition at the total shipments defined in the plan.

**What happens if I deliver issues late?**
Revenue is recognized when the shipment is approved, not when it was originally scheduled. Late deliveries recognize revenue in a later month — provided the approval still falls within the active billing period.

**Do credit notes affect recognition?**
Yes. See [Credit Notes](#credit-notes) above.

**What if a subscription is canceled with undelivered issues?**
Undelivered issues remain as deferred revenue until they are refunded (appears in "Refunds Made"), written off (appears in "Voided" or "Uncollectible"), or eventually delivered late.

**Can I see which shipments were recognized?**
Yes — if you have the appropriate permissions, use the download icon next to this row to export detailed transaction data including shipment dates and amounts.

***

## Summary

|                        |                                                                         |
| ---------------------- | ----------------------------------------------------------------------- |
| **What appears here**  | Revenue earned when issues/shipments are delivered and approved         |
| **Formula**            | (Shipments Fulfilled / Shipments Per Period) × Invoice Amount (ex. tax) |
| **Deferred Revenue**   | Positive — liability decreasing                                         |
| **Recognized Revenue** | Negative — income earned                                                |

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# Sibling pages

* [Recognized Revenue - Time](https://docs.pelcro.com/v2.4/docs/accounting-revenue-recognition-time.md)
* [Recognized Revenue - eCommerce](https://docs.pelcro.com/v2.4/docs/accounting-revenue-recognition-ecommerce.md)