In case of revenue recognition scenarios, the sales order invoice should remain the same as without revenue recognition. The primary account entry should be Receivables (B/S) against Sales revenues (P/L).
Additionally, another secondary entry should be created: Sales revenues deferred (P/L) against Deferred revenues (B/S). These should be separate accounts from the original invoice transaction.
Later, the recognition journal will simply reverse the transaction above. This way, there is no conflict between the accounts and validations of the original invoice revenue transaction.
When using the revenue recognition functionality in sales orders, the sales revenues posting will be replaced by the deferred revenue transaction type. Later in the revenue recognition journal, the deferred revenue will be transferred to the sales revenue account.
While this posting logic is correct from a G/L perspective, it causes several issues:
- The revenue recognition journal will create "manual" transactions on the related main accounts. For this reason, these main accounts cannot be blocked for manual entries, otherwise the posting of the journals will fail.
- VAT code requirements cannot be used on the revenue accounts, because the sales order invoice is posted to the deferred revenue instead. In the recognition journal, the transfer is made for the net amount, so a validation cannot be used.
- Financial dimensions that are required on the sales revenue account and not validated when the sales order invoice is posted. Only later when the recognition journal is posted, the system validates again the revenue account rules.
The suggested solution solves these issues by using the normal P&L account for the sales invoice revenue and applies all the usual validations and restrictions. The revenue recognition transactions (first the deferral, later the recognition) are created on separate accounts, thus there can be different, less restrictive validations in place.
Furthermore: With this solution in place, customers that don't require a separate account can still chose to use the same P&L account in the posting rules that thereby get the same result as today.