Deferred Revenue and Expense

Deferred revenue is money billed today for a service delivered over coming months; deferred expense is yearly insurance or a subscription paid in advance. When an item is marked Enable Deferred Revenue with service start and end dates, the Sales Invoice credits a Deferred Revenue liability account instead of income, and the monthly Process Deferred Accounting job moves one month's share into income. The report shows, per invoice and item, how much is released and how much is still pending. For a Nepali tour company selling yearly packages it keeps the Profit and Loss honest instead of a huge Shrawan and empty months after. VAT is still charged in full on the invoice; only the income is spread.

Amount released per month = Total deferred amount / Months in the service period; Pending = Total - Released to date

1. 01On the Item, tick Enable Deferred Revenue (or Deferred Expense) and set the deferred account.
2. 02On the Sales Invoice line, set Service Start Date and Service End Date, then submit.
3. 03Each month, run Process Deferred Accounting from the search bar, or let the scheduler post it.
4. 04Go to Financial Reports > Deferred Revenue and Expense.
5. 05Set Company, Type Revenue or Expense, Filter Based On Date Range and From and To Date.
6. 06Read Total, Booked (released so far) and Pending per invoice: a Rs 1,20,000 package releases Rs 10,000 a month.
7. 07Tie the Pending total to the Deferred Revenue account balance on the Balance Sheet.

Use for annual packages or insurance paid in advance to see what is earned and what is pending.

A Rs 1,20,000 yearly tour package sold in Shrawan releases Rs 10,000 revenue each month.