Hi, this is Kristi Slininger for Dynamics 365 Finance.
Today we're going to walk through the basics of revenue
recognition and how it's used on sales orders within the
system.
I'll begin by navigating to the Revenue recognition module.
From here, I'll choose Orders and then choose All sales
orders,
which will open up my list of sales orders that
I have in the system.
I'm going to choose the link for the existing sales
order that I have already created.
My sales order contains three different items. My first item
that we have at the top is the laptop.
You can see here in my columns
that I have a new column called Revenue schedule in my
grid.
In the revenue schedule, I have nothing to find here
for my hardware item because this item will have revenue
recognized immediately upon invoice for this item.
And because of that, I don't need a revenue schedule.
For my next item
is a sustained engineering service type item, or a
support type item.
I have a revenue schedule defined for that line with
a 12 month schedule.
So what this means is that the item cannot have
revenue recognized immediately upon posting the invoice,
but instead has to be recognized across a 12 month
timeframe as we actually fulfill the obligation for that contract
with the customer.
Our 3rd item has a one occurrence revenue schedule assigned
to it,
and this item is for an installation service item.
Here is an example of an item where you could
actually use a start and an end date for a
milestone type situation.
For example, let's say that the customer purchases a laptop
in September.
But they come back in the month of October
to actually have the installation completed. What we could do
is we could define a start and end date
in October. To define when the install will happen and
our revenue will be deferred up until that date or
that point in time.
If we go to Manage on the Action Pane
at the top there is a new section called revenue
recognition
if we choose the revenue price allocation.
This window can be used to see the revenue price.
It will be used from an accounting perspective when we
post the invoice.
Notice the first columns.
We have the amounts that are shown to the customer
on the sales order and the corresponding invoice.
But if we look over to the allocation amount
these are the amounts that are calculated for the revenue.
or the deferred revenue that will be posted into general
ledger. Notice that the amounts are different,
and that could happen in situations where you actually include
a portion of the revenue in one item and decrease
the price of another item.
From here we will close that window and if we go
back to the Manage option on our Action Pane and
go back to our revenue recognition section.
We have another menu item called Expected revenue recognition schedule.
I'll choose that menu item and this will open up
the expected revenue schedule that will be created now.
This is just based on the confirmation date of the
sales order at this point,
so the dates that we're seeing for the recognize date
column may change when we actually do the invoice itself.
The important pieces of information you're seeing here
are the estimated recognize date along with the actual
amount that will be recognized on each of those dates
or periods.
Notice at the bottom we have our one occurrence item
also for the full 321
dollars. Now, if I had put a date of
October.
in my Start end date, that recognize date would
be pushed out also to the month of October.
I'll choose to close this page.
And from here, I'm going to go ahead and choose
to invoice the sales order.
When we do the invoice of the sales order
what happens is that the expected revenue schedule that we
just created or viewed will actually be removed and the
actual revenue schedule will be created.
I'm going to choose to invoice all of my lines for my
sales order.
And choose OK to generate the invoice.
From here, we can go up to the journals invoice
at the top
and take a look at the accounting entry that was
created. If we look at the voucher
I just want to point out again that the amounts
that we're seeing here on the accounting side for general
ledger are different than the amounts that were reflected to
the customer on the sales order and the invoice.
So if you see here,
here's our product sales line.
This was for our laptop,
which the customer was charged $1100.00 but because of the
revenue price reallocation we’re actually charging a different amount.
Also, the deferred revenue reflects the 2 lines that had
a revenue schedule assigned to them and the situation.
We can see that those 2 amounts are actually going
to be deferred
if we go back and close out of those
2 pages. I'm going to go back to the Manage
option on my Action Pane. Notice my expected revenue
recognition schedule menu
item is now disabled because that revenue
schedule is now replaced with the actual schedule.
If I choose the Revenue recognition schedule menu
item, here is the actual schedule that was created as
a result of the invoice at this point in time.
We could choose to recognize the revenue using the Create
journal option.
I hope this gives you a good overview of the
basic functionality for revenue recognition.
Additional documentation will also be available and can be found
at docs.microsoft.com. Thank you for your time.
