Hi everyone,

I am sharing my current practice of recording my revenue. please suggest if I am doing it correctly or I need to change something to make it correct.

I have a subscription sales business where I invoice for my product (as income account) in full-year (12 months). The customers pay me the full invoice amount.

Now I realised that this is an unearned revenue for the sales month and it needs to be recorded as earned after the end of 1 month, 2nd month and so on until the 12th month.

I googled about this and found few answers. I implemented the following:-

1 For every Invoice, I changed my product income account to a liability account so that the invoice amount is recorded as deferred revenue (current liability) and doesn't show up as income in my p&l.

2 Created a JE, to debit the deferred revenue (current liability) with 1/12 amount after 30 days and credit the Income account with individual customer name (which was initially the product's income account before the change to current liability).

3 Made this JE as recurring for the next 11 months.

I hope I could make my question clear.

Now my few concerns are:-

1 When I run P&L on an accrual basis, it shows me the correct value of income in relevant months, but when I run the same p&l on a cash basis, then it doesn't change anything (I mean it should show the income in the month of receipt rather than accrual month).

2 Is my method correct ?

3 Can I do one JE per month (rather than doing JE for every single invoice with different customer's) ?

Please guide.

Thanks and regards,

Navneet