How To Enter and Process Deferred Revenue Sales
If you have not used this feature previously, see the Deferred Revenue Setup instructions prior to entering the Sales Order. Also, see the Deferred Revenue FAQ for more information on this topic.
Here is an outline of the steps to this process:
1. Create a new sales order
To process a Deferred Revenue Invoice, enter the Sales Order just like any other with one exception ... the Invoice Qty column.
1.1. Enter the deferred revenue invoice
By default, AcctVantage will match the Invoice Qty to the Ship Qty, effectively invoicing for only those items that you are able to ship.
However, for a Deferred Revenue Invoice, you will need to manually change the Invoice Qty to equal the Order Qty.
In the example below, we are invoicing and collecting payment for a custom product the customer has ordered. Take note of the quantities and amounts. Since the Invoice Qty > Ship Qty, this will generate the credit to the Deferred Revenue account for the Invoice Extended amount.
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- Order Qty = 1
- Ship Qty = 0
- BO Qty = 1
- Invoice Qty = 1
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- Order Extended = $1,000.00
- Ship Extended = $0.00
- Invoice Extended = $1,000.00
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1.2. Add a payment
When it comes to recording the debit side of the transaction, this can be done either via a Receipt or by charging the Balance Due to A/R (or a combination of both.) However the payment is applied, Deferred Revenue will still be in effect since you're recording an asset received from the customer and a liability owed to the customer.
After accounting for the balance due, you can change the Order Status to Shipped/Invoice and then Post the Invoice. Since the BO Qty > 0, the next step will be to fulfill the backorder.
If you require only a partial down payment from the customer, the system will allow you to record a partial payment and charge the remaining balance to A/R.
If there are other items on the sales order that will be fully shipped, those items can be treated as you normally would for billing, fulfillment, etc.
When this Invoice is shipped/invoiced and posted, the system will create the following G/L entries:
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Debit: $1,000 to the G/L account associated with the Receipt Type to recognize the payment received. Alternatively, the system allows the invoice amount to be charged to A/R.
Credit: $1,000 to the Deferred Revenue liability account to recognize the customer's order has not been shipped.
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Notes:
- For Deferred Revenue sales, Sales Income and Cost of Goods Sold will not be recognized until the backorder is fulfilled.
- If there are other items on the order that are being shipped (either in-full or partially), Sales Income and Cost of Goods Sold will be recognized as usual for those items.
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2. Fulfill the customer's order
When the inventory is available to fill the customer's order, the rest of the process follows the usual rules for filling backorders.
2.1. Fill the backorder and create a new sales order (i.e. Ord-BO)
- Navigate to Sales -> Backorders and cross-reference to the Sales Order window to find the Backorder.
- Highlight the Backorder and use the Action Menu -> Fill Backorders. This will populate the Marked column.
- Next, use the Action Menu -> Create Orders for filled BOs. This will create a new Sales Order, which is referred to as an Ord-BO.
2.2. Process the Ord-BO
Return to the Sales -> Sales Orders & Quotes window and find the Ord-BO that was just created. You can use the cross-reference to find the order the same way you found the backorder in the previous step.
Next, Order Status will need to be changed to Shipped/Invoice and the invoice will need to be posted.
If the balance due from the original invoice was charged to the customer's A/R, then the best practice to recording payment would be through the Receipt screen.
In the example below, we are only shipping the previously ordered and paid items. Take note of the quantities and amounts. Since the Invoice Qty < Ship Qty, this will generate the debit to relieve the Deferred Revenue account.
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- Order Qty = 0
- Ship Qty = 1
- BO Qty = 0
- Invoice Qty = 0
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- Order Extended = $0.00
- Ship Extended = $1,000.00
- Invoice Extended = $0.00
When this Invoice is shipped/invoiced and posted, the system will create the following G/L entries:
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Debit: $1,000 to the Deferred Revenue liability account to relieve the balance from the original invoice.
Debit: to the Cost of Goods Sold expense account for the value of the inventory.
Credit: $1,000 to the Sales Income account.
Credit: to the Inventory asset account for the value of the inventory.
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