Straight-line - No Proration; By Payment Cycle Method
Recognized in equal chunks, without proration, and based on the payment cycle (for example: quarterly, yearly, etc.) of the service.
When to use straight-line revenue recognition
This revenue recognition method may not meet GAP ASC-606 requirements.
You might want to look at the ratable daily revenue recognition instead.
Straight-line revenue recognition makes for very simple, easily understandable revenue recognition.
This method does not prorate, and tries respect the payment cycle (for example: quarterly, yearly, etc.) of the invoice. For example:
- Quarterly invoices will be split evenly across 3 months (even if the service period starts mid-month)
- Yearly invoices will be split evenly across 12 months (even if the service period starts mid-month)
- (Other payment cycles will be treated in a similar manner)
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.
Example
Let's look at an example for a quarterly invoice created on Jul 20, 2025, with
service dates of July 20, 2025 - October 19, 2026 (a quarterly term).
| Period | Month | Revenue | Explanation |
|---|---|---|---|
| First period | Jul 2025 | $ 400.00 | One-third of the total revenue |
| Aug 2025 | $ 400.00 | One-third of the total revenue | |
| Last period | Sep 2025 | $ 400.00 | One-third of the total revenue |
| Total | $1,200.00 |