RevRec 4-4-5 Accounting 

Overview 

An accounting period is a span of time during which businesses gather, prepare, and organize their financial activity. The accounting cycle begins at the start of the accounting period and ends on the final day of the period. Once the accounting period closes, the company can prepare its financial statements based on the work done during the accounting cycle.

4-4-5 Accounting Calendar is one of the methods of managing accounting periods. The 4-4-5 accounting calendar means that in each quarter, the first accounting period consists of the first four weeks, the second period consists of the next four weeks, and the third period consists of the next five weeks. This quarter accounts for 13 weeks, and the four quarters account for 52 weeks in total or the full calendar year.

A twist to this uniform schedule occurs once in every six years when a fifty-third week comes up to catch up for leap years and the standard 52-week year accounts for only 364 days.

How RevRec Handles 445 Accounting? 

When 4-4-5 accounting functionality is enabled, RevRec closes the accounting period with a defined fiscal period-end instead of the gregorian calendar month-end. Revenue Recognition is done according to the number of days in a fiscal period which means that it works only with the Daily Ratable Plan where RevRec calculates the per day revenue of a contract and applies it to the number of days in each fiscal period.

You can configure the following three combinations of this accounting calendar in RevRec as follows:

• 4-4-5 accounting calendar
• 4-5-4 accounting calendar
• 5-4-4 accounting calendar

RevRec has an added ability for every sixth year, an extra week is added to the last quarter of that fiscal year to catch up for leap years.

Configuring 4-5-5 Accounting in RevRec 

Contact RevRec Support to enable this feature on your RevRec site with the following information to set the fiscal year start date and the accounting calendar method:

Examples 

4-4-5 Accounting Calendar 

A one-year ratable contract is created with a contract value of $1,200 on 15th January 2022. The fiscal year start date is set as 30th January.

As per the fiscal calendar, the contract date - 15th January 2022 falls in the last period of the previous fiscal year since the current fiscal year starts on 30th January. With the group 4-4-5, the last period of the previous fiscal year consists of 35 days. Therefore, revenue is recognized for 15 days in that period. Furthermore, the system follows a 28-28-35 days routine in the current fiscal year and recognizes revenue accordingly.

4-5-5 Accounting Calendar 

A one-year ratable contract is created with a contract value of $1,200 on 15th January 2022. The fiscal year start date is set as 30th January.

As per the fiscal calendar, the contract date - 15th January 2022 falls in the last period of the previous fiscal year since the current fiscal year starts on 30th January 2022. With the group 4-5-4, the last period of the previous fiscal year consists of 28 days. Therefore, revenue is recognized for 15 days in that period. Furthermore, the system follows a 28-35-28 days routine in the current fiscal year and recognizes revenue accordingly.

5-4-4 Accounting Calendar/Group 

A one-year ratable contract is created with a contract value of $1,200 on 15th January 2022. The fiscal year start date is set as 30th January.

As per the fiscal calendar, the contract date - 15th January 2022 falls in the last period of the previous fiscal year since the current fiscal year starts on 30th January 2022. With the group 5-4-4, the last period of the previous fiscal year consists of 28 days. Therefore, revenue is recognized for 15 days in that period. Furthermore, the system follows a 35-28-28 days routine in the current fiscal year and recognizes revenue accordingly.