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Finance Unearned / Deferred Revenue
Finance Unearned / Deferred Revenue
Unearned / Deferred Revenue is when payments are received before the invoice issued date. An example of unearned / deferred revenue is collecting deposits for re-enrollment contracts for the next fiscal year.
Note
: The general ledger account must have a Type of “Unearned Revenue” or “Deferred Revenue”.
There are two approaches to consider for recording unearned / deferred revenue in PCR Educator.
1. Recording the unearned / deferred revenue on the invoice line items: Using this approach, a manual journal entry must be made in order to move the amounts from unearned / deferred revenue (liability) to revenue (income).
Note
: Use this approach when the revenue must be recognized in a prorated manner over the course of the year.
2. Recording the unearned / deferred revenue on the association from the receipt to the invoice. Using this approach, the invoice must be dated for when the revenue is earned and the invoice line items are for the revenue accounts.
Note
: Use this approach when all revenue is recognized at once. While you can use the first approach in this case too, this approach avoids the need for a manual journal entry.
Note
: Specify the unearned / deferred revenue account on the
Payment Configuration
so that it is automatically applied when payments are received online.
Note
: When manually recording receipts, specify the “Default Unearned” account on the deposit details.
What automatically happens when using the second approach:
Revenue is already recognized in the next fiscal year since the invoice is dated and posted in the next fiscal year. Cash is received for the date of the payment. There are two adjustments the system makes when Finalizing the deposit for the payment:
1. Accounts Receivable is underreported on the date the payment is received until the invoice date. So on the date of the payment, AR is debited and Unearned / Deferred is credits.
2. On the date the invoice is issued, AR is credited and Unearned / Deferred is debited reversing the transactions added for the payment date.
Example
:
A contract is completed February 1st with a $10,000 tuition invoice dated for July 1st. There is an initial deposit of $1000.
Contract Submitted February - the contract is post dated to the start of the next fiscal year.
Cash
AR
Unearned
Revenue
2/1
7/1
10000
10000
Total
10000
10000
Deposit Paid - the unearned logic is not applied yet.
Cash
AR
Unearned
Revenue
2/1
1000
(1000)
7/1
10000
10000
Total
1000
9000
10000
Deposit Finalized - the unearned logic is applied.
Cash
AR
Unearned
Revenue
2/1
1000
0
1000
7/1
10000
0
10000
Total
1000
10000
1000
10000
See also
Payment Configuration
Action
Course
DAT
PCR Educator K-12 School Information System is an online database engineered for independent and private schools to deliver the highest level of flexibility, unique experience, transparent communication and customized design. Being a complete cloud-based solution, PCR Educator system guarantees convenient access anytime, anywhere.
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