# Revenue Recognition

Revenue recognition is an accounting principle that dictates when and how
a company records revenue in its financial statements. It focuses on recognizing
revenue when it is earned, rather than just when cash is received. This ensures
that financial statements accurately reflect a company's financial performance
and position.

ChargeOver can automatically calculate GAAP- and ASC606- compliant deferred and
recognized revenue using a number of different revenue recognition methods.

Watch the video: [YouTube video player](https://www.youtube.com/watch?v=kEN7YKbagU8)  

## Enabling revenue recognition

To enable revenue recognition in ChargeOver:

* Go to **Settings** then ==Features== then ==More Features==
* Search for "Revenue Recognition" and click the ==Get Started== button
* Set "Enable Revenue Recognition?" to "Yes" and click ==Save==

After enabling revenue recognition, you'll need to configure your products
for revenue recognition.

## Configuring revenue recognition methods on a product

ChargeOver needs to understand how you will recognize revenue for each product
you want to calculate revenue recognition schedules for.

* From the left-side menu in ChargeOver, choose the **Products** option
* Click the product you want to configure revenue recognition for
* Choose the **Service Dates & Revenue Recognition** tab
* For **Ratable** (subscription) products, choose a service date calculation method
* Choose a **Revenue Recognition Method** from the dropdown
* Click the ==Save== button

Read more about [support revenue recognition methods](#revenue-recognition-methods).

![](product-configuration.png)

## Viewing revenue recognition for an invoice

When viewing a specific invoice, you can choose the **Revenue Recognition** option to
view the revenue recognition schedule for that specific invoice.

ChargeOver will show you the revenue recognition method, service dates, and schedule:

* Revenue - the **Revenue** column shows you the amount of revenue that will be recognized each month.
* Recognized - the **Recognized** column shows a running total of recognized revenue so far.
* Deferred - the **Deferred** column shows the remaining deferred revenue.

![](invoice-details.png)

## Reporting

Revenue recognition reporting is provided via several different reports:

* [Revenue recognition by invoice](/docs/reports/report-center/revenue-recognition/rev-rec-by-invoice-report/)
* [Revenue recognition detail](/docs/reports/report-center/revenue-recognition/rev-rec-detail-report/)
* [Revenue recognition by product](/docs/reports/report-center/revenue-recognition/rev-rec-by-product-report/)

## Revenue recognition methods

ChargeOver supports several different GAAP- and ASC606- compliant revenue recognition methods.

:::tip

Talk to your accountant or tax advisor!

Your accountant or tax advisor is your best resource for determining how your business should be recognizing revenue.

:::

### Ratable - daily

Recognized daily over time throughout the service period.

* Learn more: [Ratable - daily revenue recognition, with examples](/docs/add-ons/revenue-recognition/revenue-recognition-ratable-daily)

### Ratable - 30/360

Recognized over time where the number of days in a year is considered to be 360 (12 months in a year, each with exactly 30 days).

* Learn more: [Ratable - 30/360 revenue recognition, with examples](/docs/add-ons/revenue-recognition/revenue-recognition-ratable-30360)

### Installment

The installment method is used to recognize revenue when cash is received
in multiple installments over an extended period of time for goods or
services delivered.

* Learn more: [Installment revenue recognition, with examples](/docs/add-ons/revenue-recognition/revenue-recognition-installment)

### Sales basis

The sales basis method recognizes all revenue at the time of sale.

* Learn more: [Sales-basis revenue recognition, with examples](/docs/add-ons/revenue-recognition/revenue-recognition-sales-basis)

### Completed contract

The completed contract method of accounting recognizes all revenue when the
contract is completed and the invoice is paid.

* Learn more: [Completed-contract revenue recognition, with examples](/docs/add-ons/revenue-recognition/revenue-recognition-completed-contract)

### Straight-line - No proration

Straight-line revenue recognition recognizes revenue in equal-amount chunks
throughout the service period.

* Learn more: [Straight-line revenue recognition, with examples](/docs/add-ons/revenue-recognition/revenue-recognition-straightline-noproration)


## QuickBooks and revenue recognition

ChargeOver makes [revenue recognition with QuickBooks Online easy. Read more.](/docs/add-ons/revenue-recognition/revenue-recognition-with-quickbooks-online)

## Frequently asked questions

### How are taxes/VAT recognized?

Taxes/VAT are generally not considered revenue, and are never deferred. Reporting in ChargeOver shows the pre-tax
subtotals of the invoices.

### How are one-time setup fees recognized?

Setup fees are never deferred, and instead always recognized immediately. 

## Reference

Two organizations decide and enforce the generally accepted accounting principles (GAAP):

* The Financial Accounting Standards Board (FASB)
* The Securities and Exchange Commission (SEC).

For your reference, GAAP ASC 606 is defined here:

* [FASB - Accounting Standards Codification - section 606](https://asc.fasb.org/606/showallinonepage)