## Documentation Index

Access the complete documentation index at:
https://www.zoho.com/ae/books/help/llms.txt

Use this file to discover all available documentation pages before proceeding.

# Functions in Revenue Recognition

Once you enable revenue recognition, you can configure revenue recognition rules, associate them with items and transactions, and track revenue recognition details.

## Configure Revenue Recognition Rules

Businesses may recognize revenue differently depending on when services are delivered. For instance, businesses offering instant access to digital services may recognize revenue at the start of the period, while those rendering it gradually, like telecom services, may prefer recognizing revenue evenly across the period. Zoho Books lets you create custom revenue recognition rules that match your business model.

**Note:** The number of rules you can create varies based on your Zoho Books plan. Visit the [pricing page](https://www.zoho.com/books/pricing/) for more details.

To configure a revenue recognition rule:

*   Go to **Settings** on the top right corner of the page.
*   Navigate to _Module Settings_, and select **Revenue Recognition** under _General_.
*   Click **Edit** to the right of Default Rule to configure the default rule, or click **\+ Create New Rule** to create a new customised rule.
*   In the pop-up, fill in the following fields:
    *   **Rule Name**: Enter a name for the rule. For example, End-of-Period Recognition for Consulting Service. Check the **Mark as Default** option to set this rule as the default.
    *   **Description**: Enter a short note about the revenue recognition rule and how it should be applied.
    *   **Deferred Revenue Account**: Select an account to track the payments received for services that are yet to be rendered.
    *   **Recognition Frequency**: Select how often you want revenue to be recognized. Revenue can be recognized in the following ways:
        *   **Monthly**: The revenue will be recognized every month. This option is preferred by quarterly, half-yearly, or annual subscriptions where services are rendered monthly, such as streaming services, rent payments, or utility bills.
        *   **Quarterly**: The revenue will be recognized every quarter over the service period. This option is useful for services that are delivered continuously but reported or reviewed on a quarterly basis.
        *   **Yearly**: The revenue will be recognized every year over the service period. This is useful for long-term service engagements. For example, a three-year IT support and consulting contract is recorded upfront, but the revenue is recognized each year as the service is delivered.
        *   **Once**: The revenue will be recognized only once. This is useful for services such as a non-refundable onboarding or implementation service that are billed upfront and completed either at the start or end of the contract period. Since the service is completed in one instance, the full revenue is recognized at once.
        *   **Custom**: The revenue will be recognized based on a custom frequency that you define. Enter a number and select whether it applies to months or years. This option is useful for services with non-standard billing or delivery cycles, such as contracts that require revenue recognition every 2 months or every 6 months.

**Note:** The options supported for **Recognition Method** and **Recognition Frequency** vary based on your Zoho Books plan. Visit the [pricing page](https://www.zoho.com/books/pricing/) for more details.

*   **Recognition Method**: This determines how the recognized revenue is calculated.
    *   **Daily** The revenue is recognized based on the actual number of service days. The total revenue is divided by the number of service days and recognized proportionately for each period based on the number of days in that period.

**Scenario:** A subscription worth $100 has been created from 13 February to 12 March  
The total number of days = 28.  
February (13th–28th): 16 days  
March (1st–12th): 12 days  
Revenue per day = $100/28 = $3.57  
Recognized Revenue for February = $3.57 × 16 = $57.14  
Recognized Revenue for March = $3.57 × 12 = $42.86

*   **Evenly Distributed**: The total revenue is divided equally across all recognition periods, regardless of the number of days in each period.

**Scenario:** A subscription worth $1200 is created from 1 January 2022 to 31 December 2022.  
The revenue frequency is monthly.  
Total number of periods = 12.  
Recognized revenue per period = $1200/12 = $100.  

*   **Evenly Distributed (With Prorated Values)**: The total revenue is evenly distributed across all recognition periods. If a recognition period does not fully fall within a calendar month, the revenue for that month is prorated based on the number of service days.

**Scenario:** A subscription worth $1,200 is created for the service period 11th January 2024 to 10th January 2025, with the Recognition Frequency set to Monthly. Although the service spans 13 calendar months, it consists of 12 full monthly service periods (11th to 10th). Since revenue is recognized by calendar month, the first and last months are prorated based on the number of service days.

**January 2024 (Jan 11–31)**  
Service days: 21 days  
Total days in January: 31  
Revenue recognized: $100 × (21 ÷ 31) = $67.74  
**January 2025 (Jan 1–10)**  
Service days: 10 days  
Total days in January: 31  
Revenue recognized: $100 × (10 ÷ 31) = $32.26  

Total revenue recognized = $67.74 + ($100 × 11) + $32.26 = $1,200

*   **Recognition Time**: This determines when the revenue is recognized within each recognition period.
    *   **Period Start** - The revenue is recognized at the beginning of each recognition period, based on the selected recognition method.

**Scenario:** Zylker has set the Recognition Time as Period Start.

*   Invoice Amount: $100
*   Start Date: January 15
*   End Date: February 14
*   Recognition Frequency: Monthly
*   Recognition Method: Evenly Distributed (with prorated values)  
    In this scenario, the revenue will be recognized as $54.84 in January and $45.16 in February.

*   **Period End** - When set to Period End, revenue is recognized only after the completion of each recognition period, based on the selected recognition method.

**Scenario:** Zylker has set the Recognition Time as Period End.

*   Invoice Amount: $100
*   Start Date: January 15
*   End Date: February 14
*   Recognition Frequency: Monthly
*   Recognition Method: Evenly Distributed  
    In this scenario, the revenue will be recognized as $54.84 in February and $45.16 in March.

*   Click **Save**.

Once you configure a revenue recognition rule for your organisation, you can associate it with items.

* * *

## Associate Revenue Recognition Rules With Items

You can associate revenue recognition rules with items. This rule will be automatically applied to the invoices and recurring invoices created using this item.

To associate a revenue recognition rule with an item:

*   Go to _Items_ on the left sidebar and select **Items**.
*   Click **\+ New** in the top right corner to create an item, or select an existing item, and click the **Edit** icon in the top right corner of the details page.
*   In the next page, fill in the necessary details.
*   Select a rule from the **Recognition Rule** dropdown. If you do not select a rule, the Default rule will be applied.
*   Select a **Deferred Revenue Account** to record and track advance payments until revenue is recognized.
*   Click **Save**.

* * *

## Associate Revenue Recognition Rules to Transactions

In scenarios where revenue needs to be recognized differently for the same item, you can apply a revenue recognition rule at the transaction level in an invoice or recurring invoice. Zoho Books will then recognize revenue for that line item based on the selected rule.

### Associate Revenue Recognition Rules to Invoices

To associate revenue recognition rules to invoices:

*   Go to _Sales_ on the left sidebar and select **Invoices**.
*   Click **\+ New** in the top right corner to create an invoice, or select an existing invoice, and click **Edit** at the top of the details page.
*   Click the **More** icon next to the required line-item, and select **Show Additional Information**.
*   Click **Revenue Recognition** below the item.
*   Select the desired rule from the **Recognition Rule** dropdown.
*   Set the **Start Date** and **End Date**. Revenue will be recognized during this period.
*   Select a **Deferred Revenue Account** to record and track advance payments until revenue is recognized.
*   Click **Save**.

### Associate Revenue Recognition Rules to Recurring Invoices

To associate revenue recognition rules to recurring invoices:

*   Go to _Sales_ on the left sidebar and select **Recurring Invoices**.
*   Click **\+ New** in the top right corner to create a recurring invoice, or select an existing recurring invoice, and click **Edit** at the top of the details page.
*   Click the **More** icon next to the required line-item, and select **Show Additional Information**.
*   Click **Revenue Recognition** below the item.
*   Select the desired rule from the **Recognition Rule** dropdown.
*   Select a **Deferred Revenue Account** to record and track advance payments until revenue is recognized.
*   Click **Save**.

* * *

## Track Revenue Recognition

Once the revenue recognition criteria are met, Zoho Books automatically records the recognized revenue in the appropriate accounts. You can track these details in the following ways:

*   [View Journal](/ae/books/help/settings/revenue-recognition/functions.html#view-journal)
*   [View Revenue Recognition Details](/ae/books/help/settings/revenue-recognition/functions.html#view-revenue-recognition-details)
*   [View Revenue Recognition Reports](/ae/books/help/settings/revenue-recognition/functions.html#view-revenue-recognition-reports)

### View Journal

You can view all journal entries automatically created for a transaction, including entries for recognized revenue.

To view journal entries:

*   Navigate to the transaction’s list page. For example, go to _Sales_ on the left sidebar and select **Invoices**.
*   Select the invoice for which you want to view the journal.
*   Scroll down to the **Journals** tab.

You can view all accounting entries for that transaction, along with the impacted accounts and their corresponding debit and credit amounts.

**Scenario:** A subscription invoice worth $100 is created for the service period January 15, 2026 to February 14, 2026.

*   Recognition Period: Period Start
*   Recognition Frequency: Monthly
*   Recognition Method: Evenly Distributed (with prorated values)
*   Total service days (Jan 15–Feb 14): 31 days
*   January 15–31 (17 days): Revenue recognized: $54.84
*   February 1–14 (14 days): Revenue recognized: $45.16
*   Total recognized revenue: $100

In the Journal tab, the entries will appear with the following posting dates:

**Invoice – January 15, 2026**

*   Accounts Receivable: Debited $100
*   Sales: Credited $100  
    This records the invoice created for the customer.

**Recognized Revenue – January 15, 2026**

*   Sales: Debited $100
*   Deferred Revenue: Credited $100  
    The invoice amount is moved to Deferred Revenue because the revenue is not yet earned.

**Recognized Revenue – January 31, 2026**

*   Deferred Revenue: Debited $54.84
*   Sales: Credited $54.84  
    This recognizes revenue earned from January 15 to January 31.

**Recognized Revenue – February 28, 2026**

*   Deferred Revenue: Debited $45.16
*   Sales: Credited $45.16  
    This recognizes the remaining revenue earned from February 1 to February 14.

### View Revenue Recognition Details

You can view revenue recognition details for a transaction from its Details page. The **Revenue Recognition** tab provides a summary of each line item’s revenue recognition status, including the recognition preference, recognized amount, and deferred amount.

To view the revenue recognition details for a transaction:

*   Go to _Sales_ on the left sidebar and select **Invoices**.
*   Select the invoice for which you want to view the revenue recognition details.
*   Click the **Revenue Recognition** tab.

The following details are displayed:

**Field**

**Description**

**Item**

The name of the item for which revenue is recognized.

**Item Amount**

The total amount of the line item.

**Recognition Preference**

The revenue recognition method applied to the item.

**Recognition Amount**

The amount scheduled to be recognized.

**Recognized Amount**

The amount of revenue that has already been recognized.

**Deferred Amount**

The amount of revenue that has not yet been recognized.

### View Revenue Recognition Reports

Zoho Books provides revenue recognition reports that give you clear visibility into recognized and deferred revenue for your transactions.

To view revenue recognition analytics:

*   Select **Reports** in the left sidebar.
*   Click **Revenue Recognition** under _Report Category_.

The revenue recognition report will be displayed.