User Manual - Revenue Recognition

1.Overview 

This document helps you to understand the functionality of 'Revenue Recognition' & how to use it in the Transactions & its effect on postings. 

2.REVENUE RECOGNITION 

The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle. They both determine the accounting period, in which revenues and expenses are recognized. According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received. 

2.1   ACCOUNT DEFAULT 

To create the new Account Default in the Vienna Advantage, the user needs to open the Account Default window from the menu.  

To open the Account Default window user can search the window in the menu search utility or open the window using the following path: 

Menu Path: Menu >Financial Management> Posting Setup> Account Default 

 Find below the print shot to open the Account Default window from the menu as per the given path: 

Open

Click on the Account Default window and the system will open the Account Default window as shown in the print shot below: 

Open

The following are the steps, that are to be completed for setting up the Account Default in the Vienna Advantage System: 

• The Tenant will be auto-populated. 

• Select the star Organization. 

• Enter the Name of the Account Default. 

• Enter the Code of the Account Default. This code is going to be the Ledger code of COA or Default Code entered at the COA and Financial Group form. This ledger code is very important and used while linking the ledger code with the Accounting Schema. 

• Select the Related To from the drop-down list. Find below the details of the Related To option: 

Bank Account – When selected this option than the generated Account defaults are specific for the Bank Account Master Entity. 

Cashbook - When selected this option than the generated Account defaults are specific for the Cashbook Master Entity. 

Charge - When selected this option than the generated Account defaults are specific for the Charge master entity. 

Customer - When selected this option than the generated Account defaults are specific for the Business Partner Group and Customer Master Entity. 

Employee - When selected this option than the generated Account defaults are specific for the Business Partner Group and Employee Master Entity. 

Product - When selected this option than the generated Account defaults are specific for the Product Category and Product Master Entity. 

Production Rule - When selected this option than the generated Account defaults are specific for the Production Rule Master Entity. 

Project - When selected this option than the generated Account defaults are specific for the Project Master Entity. 

Tax Rate - When selected this option than the generated Account defaults are specific for the Tax Rate Master Entity. 

Vendor - When selected this option than the generated Account defaults are specific for the Business Partner Group and Vendor Master Entity. 

Warehouse - When selected this option than the generated Account defaults are specific for the Warehouse Master Entity. 

Withholding - When selected this option than the generated Account defaults are specific for the Withholding Master Entity. 

Work Center - When selected this option than the generated Account defaults are specific for the Work Center Master Entity. 

Asset - When selected this option than the generated Account defaults are specific for the Asset Master Entity. 

• Select the Variance Type from the drop-down list. This field represents that the Account default is related to Invoice or Purchase variance. Find below the details of the Variance type. 

  1. Invoice Price Variance 

  2. Purchase Price Variance 

• Check on the Active checkbox, which represents that the Account Default is active and can be used in the transactions. 

• Select the Recognize Type from the drop-down. Find below the details of Recognize type values 

  1. Unearned Revenue 

  2. Trade Revenue 

  3. Prepaid Expense 

  4. Product Expense 

  5. Charge Revenue 

  6. Charge Expense 

Note: There should be one record to be linked with these recognize type, as system used to search the account default to pick up the right ledger code while recognizing the Revenue or Expense.  

2.2  REVENUE RECOGNITION  

2.2.1        REVENUE RECOGNITION HEADER 

In the Vienna Advantage system, to set up the Revenue Recognition the user has to open the Revenue Recognition window using the search utility available at the menu or open the window using the following path: 

 Menu Path: Menu>Partner Relation>Revenue Recognition 

Click on the Revenue Recognition window and the system will open the Revenue Recognition window as shown in the print shot below: 

• The following are the steps that are to be completed for setting up the Revenue Recognition in the Vienna Advantage System: 

• Click on the New Record icon to generate the New Record. 

• The System should autofill the Tenant & Organization field. 

• If the Revenue Recognition applies to a specific Organization then select that organization, else create the Revenue Recognition in the Star (*) Organization. 

• Enter the Name of the Revenue Recognition. 

• Enter the option Description related to Revenue Recognition. 

• Check on the Active checkbox, which represents that the Revenue Recognition is active and can be used in the transactions. 

• Check on the Time Based checkbox to define the time for the Revenue Recognition. 

• Select the Recognition Frequency from the drop-down list. The user can figure out the following option by which the user can recognized the revenue/expense. 

  1. Day 

  2. Month 

  3. Year 

• Select the Recognition type from the drop-down list as follows: 

  1. Revenue: All the records which are marked as Revenue will come at the sales side. 

  2. Expense: All the records which are marked as Expense will come at the Purchase side. 

• Enter the value in the Number field. If Recognition Frequency selected as Day then this number is day, if Recognition Frequency is Month then this number is Month and so on. 

2.2.2        REVENUE RECOGNITION PLAN 

 The Revenue Recognition plan tab is a system-maintained tab and values at this tab will gets generated based on Invoice completion. Find below the print shot of Revenue Recognition Plan tab: 

Find below the details of each field of the Revenue Recognition plan tab of Revenue Recognition window: 

• Tenant & Organization field will be  auto-populated based on the Invoice. 

• Revenue Recognition field will be auto populated based on the Invoice and based on this field plan used to be generated. 

• The Accounting Book field will be populated based on Invoice Organization. During the completion of the Invoice system will check the Accounting book linked to the Organization and if not found then from Tenant window it will be picked. 

• The Invoice Line contains the reference of the Invoice and its line from where this entry gets generated by the system. 

• The Currency indicates the base currency and it will be pulled from the accounting book. 

• The Total Amount field indicates the value of the Invoice line without tax but in accounting book currency. 

• The Recognized Amount field indicates the value which is so far recognized. 

2.2.3        REVENUE RECOGNITION RUN 

 The Revenue Recognition Run tab is a system-maintained tab and values at this tab will gets generated based on Invoice completion. Find below the print shot of Revenue Recognition Run tab: 

Find below the details of each field of the Revenue Recognition Run tab of Revenue Recognition window: 

• Tenant & Organization field will be auto-populated based on the Revenue Recognition Plan. 

• Revenue Recognition Plan field will be populated based on the Revenue Recognition Plan entry. 

• The Recognized Date field indicates the date when this schedule needs to be recognized. 

• The Journal contains the reference of Journal. 

• The Recognized Amount field indicates the value which is so far recognized. 

2.2.4        ACCOUNTING 

The Default Accounting tab allows you to maintain a complete set of default Accounts associated with the Revenue Recognition in the system. Systems default Accounts and Charts of Accounts having the same combination get linked here. 

By default, when a user generates the new Revenue Recognition in the system, the system will copy all the default accounts associated with the Revenue Recognition automatically from Accounting Schema. Change the ledger code at the combination field if required. 

2.3     PRODUCT 

 In the Vienna Advantage system, to set up the Product the user has to open the Product window using the search utility available at the menu or open the window using the following path: 

 Menu Path: Menu>Product Management>Product 

Click on the Product window and the system will open the Product window as shown in the print shot below: 

While setting up the Product window the user can select the Revenue Recognition. If the user selects the revenue recognition at the product level then selecting this product at the Invoice line then system will pull this revenue recognition automatically.   

2.4   AR INVOICE 

 In the Vienna Advantage system, to set up the AR Invoice the user has to open the AR Invoice window using the search utility available at the menu or open the window using the following path: 

 Menu Path: Menu>Financial Management>Accounts Payable>AR Invoice 

Click on the AR Invoice window and the system will open the AR Invoice window as shown in the print shot below: 

After entering the Invoice header then the user needs to move at the Invoice line to select the Products or charges. Find below the print shot of AR Invoice Line: 

When the user selects the Product at the Invoice and if the product is linked with the Revenue Recognition then the system will pull up the Revenue recognition automatically. As a result of Revenue recognition select the system will enable the mandatory field called Start date where the user needs to select the value by when they plan to start the recognition. 

Similarly, the user can select the revenue recognition for the charges and the user needs to enter the start date. Select the Revenue Recognition and complete the AR Invoice. As a result of the AR Invoice completion the system will generate the Revenue Recognition plan and its schedules at Revenue Recognition Run tab. 

When the Revenue Recognition is linked with the AR Invoice line then the system will generate the following accounting consequences: 

2.5   AP INVOICE 

 In the Vienna Advantage system, to set up the AP Invoice the user has to open the AP Invoice window using the search utility available at the menu or open the window using the following path: 

 Menu Path: Menu>Financial Management>Accounts Payable>AP Invoice 

Click on the AP Invoice window and the system will open the AP Invoice window as shown in the print shot below: 

After entering the Invoice header then the user needs to move at the Invoice line to select the Products or charges. Find below the print shot of AP Invoice Line: 

When the user selects the Product at the Invoice and if the product is linked with the Revenue Recognition then the system will pull up the Revenue recognition automatically. As a result of Revenue recognition select the system will enable the mandatory field called Start date where the user needs to select the value by when they plan to start the recognition. 

Similarly, the user can select the revenue recognition for the charges and the user needs to enter the start date. Select the Revenue Recognition and complete the AP Invoice. As a result of the AP Invoice completion the system will generate the Revenue Recognition plan and its schedules at Revenue Recognition Run tab. 

When the Revenue Recognition is linked with the AP Invoice line then the system will generate the following accounting consequences: 

2.6        REVENUE RECOGNITION RUN PROCESSS 

To recognize the revenue or expenses in the system then the user needs to run the process called ‘Revenue Recognition Run’.  There are the following parameters which needs to be selected to recognize the revenue: 

• Organization – Select the Organization whose Revenue Recognition schedule to be recognized. 

• Document Type – Select the relevant GL Journal document type. 

• Account Date – Select the date by which you need to recognition. Only those schedules will be recognized whose date is equal or less than the system or current date. 

• Revenue Recognition – Select the revenue recognition which the user wants to recognize. In case you leave it blank than the system will consider all the revenue recognition record. 

Once this process will be executed then system will generate the GL journals related to revenue recognition. Find below the print shot of GL Journal: 

User has to select the relevant document type, enter the date and select the revenue recognition entry against which the system will generate the GL voucher. In case revenue recognition not selected and then system will generate the GL voucher against all the valid revenue recognition run entries. 

Cases are per Frequency: 

There are going to be the following Recognition frequency on which the Revenue or Expense Recognition will be calculated. 

• Day 

• Month 

• Year 

Day wise Frequency  (in the case of AR invoice) 

Invoice value = 12000 

Calculation of Recognition as per the Revenue Recognition: 

12000(Invoice Value)/365(Number of day in the year)=32.88(Valur per day) 

Invoice Posting: 

Let’s suppose for the 3 Days revenue realized in the system then the GL entry has to pass in the following way. 

Month Wise Frequency  (in the case of AR invoice) 

12000(Invoice Value)/91(Number of day in the month, Jan, Feb, Mar=91 days)=131.86(Valur per day) 

Invoice Posting: 

Let’s suppose for the 3 Month revenue realized in the system then the GL entry has to pass in the following way. 

131.86(Value per day)*31 (Number of days in a month)=4087.91 

131.86(Value per day)*29 (Number of days in a month)=3823.94 

131.86(Value per day)*31 (Number of days in a month)=4087.91 

Year Wise Frequency  (in the case of AR invoice) 

12000(Invoice Value)/365(Number of day in the year)=16.43835(Valur per day) 

Invoice Posting: 

Let’s suppose for the 2 Year revenue realized in the system then the GL entry has to pass in the following way. 

16.43835(Value per day)*365(Number of days in a Year)=6000 

16.43385(Value per day)*365 (Number of days in a Year)=6000 

Reverse Revenue Recognition 

To recognize the Reverse Revenue Recognition  in the system then the user needs to run the process called ‘Reverse Revenue Recognition’.  There are the following parameters which needs to be selected to recognize the revenue: 

• Organization – Select the Organization whose Revenue Recognition schedule to be recognized. 

• Document Type – Select the relevant GL Journal document type. 

• Account Date – Select the date by which you need to recognition. Only those schedules will be recognized whose date is more than the system or current date. 

• Revenue Recognition – Select the revenue recognition which the user wants to recognize.  

• Invoice Line- Select the Invoice Line for which the user wants to generate the Reverse Revenue recognition. 

• System will not Generate the Reverse Revenue Recognition for  which Revenue is not generate for equal or less then the System or Current date and will give message "Recognize Revenue of Previous Date first" 

• System will generate the Reverse Revenue Recognition for which system date is less then Invoice line date and it will consolidate all the Revenue Recognition Run and generate one Reverse Revenue Recognition.