What this does: Explains each revenue recognition option for a fee item, so you can pick when income is recognized (recorded as earned).
Applies to: GrowthZone Finance using accrual accounting (income recorded when earned, not when paid). You need staff access to billing settings.
Before you start: Check your accounting method with your accountant, and set up your chart of accounts first.
Time needed: 10 minutes to read; about 2 minutes per fee item to change.
On this page
Good to know:
- Recognition options are configured per Fee Item. You will find your Fee Items on the Fee Items page under Finance, Administrative section, Billing Settings.
When setting up your Fee Items you can elect to use accrual accounting. Using Accrual Basis, at the fee item level, you will define the various accounts to be used:
- Income (Revenue) Account: This is the revenue account that will be credited based on your revenue recognition settings.
- A/R Account: This is the asset account that represents money due.
- Deferred Revenue Account: This is the liability account used to “hold” the revenue until it is to be recognized. Based on the recognition option configured for the fee item, the account will be credited when the invoice is created and debited on the appropriate recognition day.
- Deposit Account: This current asset account is debited when payment is received for invoices.
These accounts will be debited and credited based on the revenue recognition type you choose. A debit is an accounting entry that either increases an asset or expense account or decreases a liability or equity account. A credit is an accounting entry that either increases a liability or equity account or decreases an asset or expense account. It is positioned to the right in an accounting entry.
Following are the recognition types that may be configured for your fee items.
Fully on Invoice Date
If this option is selected, when invoiced, your revenue account is credited the sale immediately and the A/R account is debited. When the invoice is paid, the A/R account is credited, and your deposit account is debited.
Example: $1200.00 Membership Dues invoice created on 8/3
- Revenue account is credited $1200.00
- A/R account is debited $1200.00
Fully on Paid Date
If Fully on Paid Date is selected, revenue will be credited to your income account when the invoice is paid. The deferred income account will be credited to “hold” the revenue, and the A/R account will be debited until the paid date. On paid datthe e the def,erred revenue will be debited, the |income ccount will be credited, the A/R account will be credited, and the deposit account will be debited.
Example: An invoice for $600.00 was created on 7/7. The invoice is paid on 8/3.
- On 7/7:
- Deferred Revenue account is credited $600.00
- A/R account is debited $600.00
- On the paid date 8/3:
- Deferred Revenue account is debited $600.00
- A/R account is credited $600.00
- Revenue account is credited $600.00
- Deposit account is debited $600.00
Fully on Invoice Due Date
If Fully on Invoice Due Date is selected, revenue will not be credited to the assigned revenue account until the due date. The Deferred Income account will be credited to “hold” the revenue until the due date and the Deferred Income account will be debited. On the day the invoice is paid, the Deferred A/R account will be debited, and the income account will be credited to the revenue account.
Example: Invoice for $400.00 is dated 7/27. The due date is 8/1.
- On 7/27:
- Accounts Receivable is |debited$400.00
- Deferred Revenue is credited $400.00
- On the due date (8/1)
- Accounts Receivable is credited $400.00
- Deferred Revenue is debited $400.00
- A payment at any time will debit Accounts Receivable and credit the Deposit account
Fully on Event Start Date
If Fully on Event Start Date is selected, revenue will not be credited to the assigned revenue account until the day of the event. The Deferred Revenue account will be credited to “hold” the funds until the event start date, and the A/R account will be debited. On the day the event starts, the Deferred A/R account will be debited, and the income will be credited to the event revenue account.
Example — Event registration invoice for $25.00 is created on 8/3. Event begins on 8/4.
- On 8/3
- Deferred Revenue Account is credited $25.00
- Accounts Receivable is debited $25.00
- Revenue account is credited $25.00
- A payment at any time will debit Accounts Receivable and credit the Deposit account
Spread Monthly on Invoice Date
For membership dues, even if payment is received up front for the entire year, you may wish to recognize revenue evenly over a specific period (generally 12 months). Spread Monthly on Invoice Date allows you to spread equal portions of a payment across a selected time frame, starting from the invoice date.
NOTE: The time frame is set in the Default Revenue Recognition Months field, which appears beneath Revenue Recognition Type as soon as any Spread Monthly option is selected. It defaults to 12.
Example: $600 Membership purchased on May 1st. Spread is set to 12 months.
- On May 1st
- A/R account is debited $600.00
- Deferred Revenue account is credited $600.00
- Revenue Account is credited $50 (1/12 of $600.00)
- Deferred revenue is debited $50.00 (1/12 of $600.00)
- Each month thereafter (for a total of 12 months)
- Revenue account is credited $50.00 (1/12 of the $600.00)
- Deferred Revenue account is debited $50.00 (1/12 of the $600.00)
- A payment at any time will debit Accounts Receivable and credit the Deposit account
Spread Monthly on Payment Date
Spread Monthly on Invoice Payment Date allows you to spread equal portions of a payment across a selected time frame beginning from the date the invoice was paid.
Example — Invoice dated 6/1 for $600.00; Fee Item set for a 12-month spread
- On 6/1
- Deferred Revenue account is credited $600.00
- Accounts Receivable account is debited $600.00
- Invoice paid on 8/4.
- Deferred revenue is debited 1/12 of $600.00 = $50
- Revenue is credited 1/12 of $600.00 = $50.00
- A/R is credited $600.00
- Deposit Account is debited $600.00
- Each month, on the day of the month the payment was initially received:
- Revenue is credited $50.00
- Deferred Revenue is debited $50.00
Spread Monthly on Invoice Due Date
Spread Monthly on Invoice Due Date allows you to spread equal portions of the revenue from the invoice due date forward.
Example:
- On 8/4
- Deferred Revenue account is credited $300.00
- Accounts Receivable account is debited $300.00
- On the invoice due date (9/3), each month $25.00 will be recognized:
- Deferred Revenue account is debited $25.00
- Revenue Account is credited $25.00
- A payment at any time will debit Accounts Receivable and credit the Deposit account
Multi-year memberships
GrowthZone is not designed to handle revenue recognition over a 2-year spread. This includes if you choose to spread monthly revenue for recognition and have a 24-month membership term, the revenue will only be spread monthly over one year. An admin would have to do this manually outside of GrowthZone and recognize it as on ‘date paid’ (cash basis) or ‘invoice date’ (accrual basis). When you handle revenue recognition outside of GrowthZone, GrowthZone will not involve any deferrals.
Best practice: We recommend that you handle revenue recognition in your own accounting software.
Common pitfalls
- Choosing accrual without confirming your method: Accrual vs. cash basis affects every entry above. Confirm with your accountant before changing recognition options on live Fee Items.
- Expecting “Spread Monthly” to catch up: The Spread Monthly options do NOT catch up — they spread forward from the payment date or invoice due date only.