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# Revenue Recognition

Revenue recognition is the act of recording revenue in the general ledger (G/L) of your merchant organization. The process of revenue recognition enables you to convert unearned income to earned income. Subscribe can offer support to any revenue recognition models. It provides the intelligence needed in Subscribe Reports available from Subscribe Merchant Portal.

Revenue can be fully recognized when it becomes earned revenue. Revenue is earned when the product or service is delivered, either in a one-time purchase or in an incremental delivery. Recognition for unearned revenue must be deferred until the customer receives some portion of the product or service and the revenue becomes earned. Rules for revenue recognition can vary widely among organizations.

With an incremental service, such as a monthly subscription, the revenue for a given time period is often earned when the customer receives access to the content for that time period.

In some cases, merchants recognize the revenue for a charge over the expected lifetime of the subscriber (the length of time that the subscriber is expected to be active with the merchant organization) because the service is delivered constantly for as long as that subscriber is active. For example, if you provide a monthly service for a recurring charge and also provide integration service as a onetime charge, the revenue for the integration service can be recognized over the expected subscriber lifetime. The expected subscriber lifetime can be somewhat fluid and can increase or decrease over time dependent among other things by the renewal periods.

Revenue recognition occurs independently of when a customer receives an invoice or makes a payment. For example, when a customer purchases a new car, the car dealer recognizes the revenue for that sale when the customer drives the car off the lot. The customer can pay in full at the time of purchase or finance the purchase over time, but the dealer fully recognizes the entire purchase price at the time the customer takes possession of the car.

## **Tracking Recognized Revenue in Subscribe**

Organizations track revenue on either a daily or a monthly basis in the most common models. Subscribe allows you to filter the data you need by the granularity needed.

Applying credits, processing refunds, and calculating prorated charges (for example, for upgrades) can have a direct impact on when revenue can be recognized. Revenue recognition for such transactions varies according to circumstances. When issuing a credit or refund, it is important to know the reason for the action in order to accurately determine the impact on revenue, Subscribe offers a way to note this information. Likewise, when recognizing revenue for prorated charges, it is important to know when the upgrade or service related to the charge will take effect.

**Parent topic:**[Subscribe Financial Activities Support](../topics/financialActivities)


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