The setup
Event by event
The annual subscription
The $1,200 fee is spread daily over the 365-day service period: $1,200 ÷ 365 ≈ $3.29 per day. January has 31 days. The $240 tax is booked to a tax liability on January 1 and is never part of revenue.The usage
The customer’s usage is recognized on the days it’s consumed, into unbilled revenue, since the usage invoice doesn’t issue until February 1.The minimum commitment true-up
The customer committed to $100 of usage but consumed only $50. The $50 shortfall is recognized in full when the true-up fee is created on January 31.The payment
On January 20 the customer pays the $1,440 subscription invoice. This moves $1,440 from receivable to cash and does not change recognized revenue.The credit note
On January 25 you issue a $30 service credit. It reduces recognized revenue by $30 in January, the period it’s issued.The period totals
Adding up the recognized revenue for January:
And the balances at January 31:
How each report reflects this
The takeaways
- Recognized revenue ($171.92) has little to do with what was invoiced ($1,440 subscription) or collected ($1,440). It reflects what was earned in January.
- Recognized plus deferred for the subscription ($101.92 + $1,098.08) equals the $1,200 pre-tax invoice.
- Tax ($240) never touches revenue.
- The payment moved cash without moving revenue.
- The credit note reduced revenue only in the period it was issued.