Deferred revenue / revenue recognition
Prepaid money starts as a liability, then becomes revenue over the period when the product or service is actually delivered.
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What it is
Deferred revenue is money collected before the related product or service has been earned, so it starts as a liability. Revenue recognition moves amounts from that liability into revenue as the promised service is delivered, such as month by month across an annual subscription.
Reach for a recognition schedule when invoice timing and delivery timing do not match. Keep cash collection, invoicing, and recognized revenue as separate events so finance can close each period without treating every prepayment as immediate income.
A simple straight-line schedule is not correct for every contract. Upgrades, refunds, credits, variable usage, multiple obligations, and contract changes can alter the schedule. Preserve an audit trail and have the policy reviewed against the standard that applies to you: ASC 606 under US GAAP, IFRS 15 under IFRS.
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Implement an ASC 606 and IFRS 15 deferred-revenue subledger from Stripe Invoice, Credit Note, Refund, and subscription events. For each invoice line, record the service period, amount, currency, and performance obligation; post cash and invoicing separately from revenue; then generate period-close entries that debit deferred revenue and credit recognized revenue as service is delivered. Create adjustment entries for refunds, credits, upgrades, and contract changes instead of rewriting posted history.