Can a credit not be revenue recognised for a specific period and not for all the contract period?

[orestis_x]

Hi all and thanks for your time,

I have the following scenario:

A Sales Contract is issued for a year and billed for the whole year. Revenue Recognition is run every month. After 9 months the customer wants to terminate the contract. What we do now is that we issue a credit note with the rest of the amount, so for example if the contract is 1200 USD and we billed this amount then we are going to create a Credit Note for 300 USD. The issue that we have is that the 300 USD are splitted and show in Revenue Recognition for the whole year but what we want is this amount to be revenue recognized for the rest of the period.

Is this doable?

Thank you,

[KatiNonhebel]

this answer was reported to be irrelevant and pointing to "Help". Please revise and rephrase your answer.

[orestis_x · Accepted solution]

Hi all. After lot of experimenting and testing we found a solution for this. When we issue the contract, for each item the quantity is 12 Months. For the credit note to take effect on the rest of the period we either enter in the quantity the remaining period, e.g 3 Months, or for each of the remaining months we issue a credit note with quantity 1 Month. The effect for this on the revenue recognition is that the credit note amount is recognized on the billing date and for the rest of the contract period based on the quantity. So this means that if the remaining period is 3 months and you enter the full remaining amount with quantity 3 months, this amount will be split in the remaining months, and if you enter quantity 1 month and the amount of 1 month, then when you run revenue recognition the amount will be recognized only for that month.

Thank you,