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Journal entries record your business transactions in RevRec Premium, which can be summarized and transferred to your accounting systems like NetSuite or QuickBooks. RevRec Premium generates journal entries across the revenue lifecycle, from invoicing to cash settlement and revenue recognition.
Let us look at an example to understand how the entries are created in RevRec Premium.
AcmeCo, a software subscription provider, sells a 3-month service plan for $120 to its customer, ByteCorp, on January 1, 2025. The invoice includes a base subscription of $100, an exclusive sales tax of $30, and a discount of $10.
ByteCorp makes a payment of $120 via Stripe on the same day, of which $100 is applied to the invoice, while $20 remains unapplied. Later, a $50 credit note is issued due to partial service dissatisfaction.
Eventually, the company receives a net payout of $115 from Stripe, after a $5 processing fee. AcmeCo uses USD as its home currency, and all amounts in this example are denominated in USD.
The following sections explain how journal entries are captured in RevRec Premium for key financial transactions across the billing, payment, tax, revenue, and expense lifecycle.
On January 1, 2025, AcmeCo issues an invoice to ByteCorp for a 3-month subscription plan. The invoice includes:
As soon as the invoice is issued, RevRec Premium captures the accounts receivable transaction and records the total amount due from ByteCorp. To ensure proper downstream accounting (especially for revenue recognition), RevRec Premium splits the journal entries into separate accounting event types, one for Accounts Receivable and one for Revenue. This allows each category to be managed independently and closed separately.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Invoice (Base) | Accounts Receivable | $100.00 | |
| AR Clearing | $100.00 | ||
| Invoice (Discount) | AR Clearing | $10.00 | |
| Accounts Receivable | $10.00 | ||
| Invoice (Tax) | Accounts Receivable | $30.00 | |
| AR Clearing | $30.00 |
Total A/R Balance: $120 (Base $100 + Tax $30 – Discount $10)
RevRec Premium uses the Accounts Receivable (AR) Clearing account as an intermediary step between the billing event (invoice issued) and subsequent Revenue/Deferred Revenue recognition, ensuring a clear audit trail and alignment with your GL structure.
Although AcmeCo issued the invoice on January 1, 2025, revenue cannot be immediately recognized in full. Since the subscription spans a three-month service period, RevRec Premium follows time-based revenue recognition principles in accordance with ASC 606, deferring the revenue initially and releasing it in monthly increments.
To enable this, RevRec Premium processes a second journal entry set under the Revenue accounting event type, segregated from the initial Accounts Receivable event. This ensures that revenue reporting aligns with the actual delivery of services.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Invoice | AR Clearing | $100.00 | |
| Deferred Revenue | $100.00 | ||
| Discount | Deferred Revenue | $10.00 | |
| AR Clearing | $10.00 |
Deferred Revenue Balance: $90 (Base $100 – Discount $10)
(Tax is excluded from deferred revenue, it is handled separately under Sales Tax Liability.)
This deferral ensures that AcmeCo recognizes revenue only when the service is delivered, upholding the matching principle in accrual accounting and meeting revenue recognition compliance standards.
In the invoice issued by AcmeCo to ByteCorp, the $30 sales tax was charged in addition to the subscription price. This tax amount is not part of revenue and must be recognized as a liability, since it is collected on behalf of the tax authority.
RevRec Premium identifies tax components from the invoice and records the amount as a Sales Tax Liability. At the same time, the system clears the corresponding balance from the AR Clearing account, completing the link between what was billed and what is owed externally.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Tax | AR Clearing | $30.00 | |
| Sales Tax Liability | $30.00 |
The tax amount was originally routed through AR Clearing on day 1 as part of the invoice. RevRec Premium now shifts it to a true liability account, removing it from internal revenue tracking.
Note:
In RevRec Premium, sales tax is recorded in the local currency of the customer, while the reporting is done in the home currency (USD in Acme Co’s case). This setup supports multi-region compliance.
On January 3, 2025, ByteCorp makes a payment of $120 via Stripe to settle the invoice. Out of the total payment:
RevRec Premium records the cash inflow using the Cash Clearing account and clears the corresponding Accounts Receivable balances. Unapplied payments are handled separately, but still tracked to maintain reconciliation integrity.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Payment | Cash Clearing | $100.00 | |
| Accounts Receivable | $100.00 |
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Unapplied Payment | Cash Clearing | $20.00 | |
| Accounts Receivable | $20.00 |
Cash Clearing acts as a temporary holding account. Once the payout is received from the gateway (Stripe in this case), the balance is moved to the actual Cash - Bank account.
In RevRec Premium, unapplied payments can either reduce A/R (as in this example) or be routed to a separate Unapplied Payment liability account based on how the mapping rules are configured.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Unapplied Payment | Cash Clearing | $20.00 | |
| Unapplied Payment | $20.00 |
Note:
If ByteCorp requests a refund of $50 or a chargeback occurs, RevRec Premium handles it through the Payment accounting event type and reverses previously recorded cash inflow.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Refund | Accounts Receivable | $50.00 | |
| Cash Clearing | $50.00 |
After receiving ByteCorp’s payment via Stripe, AcmeCo sees a net deposit of $115 into its bank account. The difference between the original $120 collected and the deposit is due to a $5 gateway (processing) fee charged by Stripe.
RevRec Premium handles this by:
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Net Payout | Cash - Bank | $115.00 | |
| Cash Clearing | $115.00 |
This entry reflects the actual cash received in AcmeCo’s bank.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Gateway Fee | Gateway Fee | $5.00 | |
| Cash Clearing | $5.00 |
These two entries combined reduce the Cash Clearing balance created during the initial payment event (Day 3) to zero, completing the cash lifecycle.
Note:
RevRec Premium records payouts in the gateway’s payout currency, which may differ from the transaction or home currency in a multi-currency setup.
Although AcmeCo invoiced ByteCorp for the full $120 on January 1, only $90 was deferred as revenue (base $100 – discount $10). Since the subscription term is 3 months, AcmeCo will recognize $30 of revenue per month.
RevRec Premium performs this automatically by releasing a portion of the Deferred Revenue into Revenue based on the service duration and recognition rule (e.g., ratable).
This step ensures that revenue is matched to the period in which the service is delivered — a core principle of accrual-based accounting and a requirement under ASC 606 / IFRS 15.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Revenue | Deferred Revenue | $30.00 | |
| Revenue | $30.00 |
Remaining Deferred Revenue Balance after January:
$90 - $30 = $60, to be recognized across February and March.
This entry will repeat automatically in each subsequent month until the deferred balance is fully cleared, unless there’s a modification or cancellation.
Note:
Revenue is always recognized in the home currency (USD), even if the transaction occurred in another currency. For foreign currency scenarios, additional FX-related entries are recorded, which we’ll address in a later section.
Midway through the contract, ByteCorp contacts AcmeCo to report dissatisfaction with part of the service. As a result, AcmeCo issues a credit note for $50, which includes:
In RevRec Premium, the credit note reverses the earlier revenue and tax obligations. If the credit note is linked to a closed revenue period, the system reverses recognized revenue and adjusts Deferred Revenue accordingly. If configured, credits with specific reason codes (e.g., write-off) may also be routed to Bad Debt Expense instead of Revenue.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Base Credit | AR Clearing | $50.00 | |
| Accounts Receivable | $50.00 | ||
| Discount | Accounts Receivable | $5.00 | |
| AR Clearing | $5.00 | ||
| Tax | Accounts Receivable | $10.00 | |
| AR Clearing | $10.00 |
RevRec Premium also reverses revenue previously recognized based on how much of the credited amount had already been recognized.
Let’s assume $20 of the credited $50 had already been recognized.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Revenue | Revenue | $20.00 | |
| Deferred Revenue | $20.00 |
RevRec Premium calculates the recognized vs. unrecognized portions of the credit and reverses accordingly.
If the credit note is issued with a reason code like “write_off”, and this reason code is mapped to Bad Debt Expense, the system posts a different set of entries:
AcmeCo, headquartered in the U.S. (home currency: USD), also serves customers in Canada. ByteCorp’s Canadian subsidiary signs a similar 3-month subscription contract for CAD 100, with a CAD 10 discount and CAD 30 tax, invoiced on January 1, 2025. The exchange rate on the invoice date is 1 CAD = 0.70 USD.
RevRec Premium handles foreign currency transactions in three stages:
Initial journal entries are recorded in the transaction currency (CAD)
Amounts are then converted to the home currency (USD) or the local currency for the tax component using the billing system’s exchange rate, OR the RevRec Premium exchange rate. a. Use of the billing system’s exchange rate, OR the RevRec Premium exchange rate for the accounting, is configurable. Contact support to enable exchange rate selection. By default, the system uses the billing exchange rate. b. RevRec Premium sources the end-of-day exchange rate from the configured FX repository. c. The user can choose one FX repo from the available ones, i.e., ECB Exchange, Fixer.io, and Open Exchange Rate (default).
Any difference at the time of payment leads to FX gain or loss entries.
Account Receivable Entry
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Invoice | Accounts Receivable | CAD 120.00 | |
| AR Clearing | CAD 120.00 |
Deferred Revenue Entry
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Invoice | AR Clearing | CAD 90.00 | |
| Deferred Revenue | CAD 90.00 |
Revenue deferral is based on a CAD 100 base – CAD 10 discount = CAD 90.
Sales Tax Liability Entry
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Invoice | AR Clearing | CAD 30.00 | |
| Sales Tax Liability | CAD 30.00 |
To support home-currency-based accounting, RevRec Premium creates conversion entries by:
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Invoice | FX Conversion Clearing | CAD 90.00 | |
| Accounts Receivable | CAD 90.00 |
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Invoice | Accounts Receivable | USD 63.00 | |
| FX Conversion Clearing | USD 63.00 |
CAD $90 X 0.70 = USD $63.00
This same process applies to deferred revenue, tax, and other components.
Note:
The FX Conversion Clearing account temporarily holds the value shift between currencies and should net to zero when both sides are posted.
On January 5, 2025, ByteCorp pays the invoice. However, the CAD-to-USD rate has changed to 1 CAD = 0.71 USD, meaning the payment converts to a lower USD amount.
Let’s assume ByteCorp pays CAD 90, and it converts to USD 63.83, compared to the original USD 63.00. This results in an FX gain of $0.83.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| Payment | Cash Clearing | USD 63.83 | |
| Accounts Receivable | USD 63.00 | ||
| FX Gain/Loss - Payment | USD 0.83 |
This reflects the actual USD amount received and books the gain caused by the improved exchange rate.
If the rate had dropped instead (e.g., 1 CAD = 0.68), the difference would be recorded as an FX loss.
In addition to FX differences at the time of payment, RevRec Premium also accounts for foreign exchange differences related to revenue recognition timing, particularly when the contract is invoiced in a foreign currency, but revenue is recognized in the home currency (USD) over time.
FX gain or loss related to revenue is calculated in RevRec, not RevRec Premium. When the accounting period is closed in RevRec, it sends both the revenue recognized and any FX adjustment to RevRec Premium for posting.
Example: RevenueFX Gain/Loss
Let’s return to Acme Co.’s Canadian customer:
Contract agreed on: Jan 1, 2025 – CAD 90
Contract rate: 1 CAD = 0.68 USD → Expected Revenue: USD $61.20
Invoice issued: Jan 3, 2025 – Rate now 1 CAD = 0.70 USD → Actual Revenue: USD 63.00
This rate fluctuation causes a gain because the recognized revenue value in USD is higher than expected.
| Business Event | GL Account | Debit | Credit |
|---|---|---|---|
| RevenueFX | Deferred Revenue | USD 1.80 | |
| FX Gain/Loss - Revenue | USD 1.80 |
This entry reflects the increase in expected revenue due to favorable currency movement. The opposite occurs in the case of a loss.
These entries appear in RevRec Premium under the “RevenueFX” accounting event type and are grouped separately from payment-related FX adjustments.
RevRec Premium supports multi-currency environments by assigning specific currency types to each account based on its role in the transaction lifecycle. This design ensures that reporting, reconciliation, and journal postings remain consistent and auditable across geographies and ledgers.
In RevRec Premium, there are four types of currency used for journal entries based on the account type.
The table below outlines the currency mapping by account type.
| Account Type | Mapped Currency | Description |
|---|---|---|
| Revenue | Home Currency | Used for recognizing revenue in the organization’s reporting currency. |
| Deferred Revenue | Home Currency | Deferred amounts are tracked and reported in the organization’s primary currency. |
| Accounts Receivable | Transaction Currency | Reflects the currency used in the invoice or credit note. |
| AR Clearing | Transaction Currency | Mirrors the receivable side until settled, in the same currency as the invoice. |
| Cash Clearing | Payout Currency | Reflects what the gateway deposits, often different from the invoice currency. |
| Cash - Bank | Payout Currency | Bank deposits are recorded in the currency actually received. |
| Tax Liability | Transaction Currency | Recorded in the same currency as the tax applied on the invoice. |
| Bad Debt Expense | Home Currency | Write-offs are recognized in the organization's reporting currency. |
| FX Gain/Loss | Home Currency | Always posted in the reporting currency for consistency in P&L reporting. |
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