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Recognition v 1.0
Revenue
Recognition
Process
A golf club might record deferred revenue for member initiation fees
and recognize the revenue as the players shoot their rounds
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India SAP CoE, Slide 3
Deferred Revenue Recognition
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India SAP CoE, Slide 4
Purpose
Revenues should be recognized when earned and expenses
should be recognized when incurred . Revenue is recorded when
earned, regardless of the timing of cash receipts
Revenues become effective in the future, if the service upon which the revenue
is based is actually performed in the future. Realization of revenues must
therefore be viewed separately to billing
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India SAP CoE, Slide 8
Revenue Recognition- Methods
REVENUE RECOGNITION: The point at which revenue (income) is
credited to a revenue account in General Ledger. There are three
possible types
A customer signs up and pays for 1 year subscription at a cost $1200. The
revenue for the subscription in recognized on a monthly basis of $100 per month.
Receivable
Sales $1200
Invoice
Order/Contract
Accrued Revenue
$100 $1200
Revenue
$100
Recognition
……
Process
……
Revenue
$100
$100
……
……
Create Invoice
The process indicates the Posting of Revenue ( T code: VF44) is used after invoice.
The customer signs up for a series of four one-on-one coaching sessions and pays
$800. Each coaching session triggers an event to recognize $200 of revenue.
Receivable
Sales $800
Invoice
Order/Contract
Accrued Revenue
$200 $800
Revenue
$200
Seminars/Coaching Recognition
……
Process
Sessions ……
Revenue
$200
$200
……
……
Create Delivery
Create Invoice
Update control lines; Realize revenue for the selected Create accounting doc.;
revenue lines period VF44 DR; deferred ,CR;
revenue
The process indicates the Posting of Revenue ( T code: vf44) is used after invoice.
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India SAP CoE, Slide 15
Steps
Set up of Revenue Recognition processes
FI accounts and their settings
SD Item categories with revenue recognition type
Account determination
IMG---- SD---- Sales ----- Sales Document item---- Define item categories
Deferred
Revenue a/c
Posting to Deferred
Revenue a/c
Before
Revenue
Recognition
After revenue
recognition
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India SAP CoE, Slide 29
LetMe
Transactions
VA01 Create Sales Order
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India SAP CoE, Slide 31
Additional info
Item Categories in Revenue Recognition
a) Used with time based revenue recognition
Type A b) Used with credit/debit memo time based revenue
recognition with memo request.
Type D Used with time based and billing related revenue recognition.