Revenue Recognition

ASC 606 and IFRS 15 require revenue to be recognised when performance obligations are satisfied. For multi-period contracts this means spreading recognition over the service period rather than booking everything on the invoice date.

When do you need this?

• Annual support contracts — recognise 1/12 of the fee per month
• Project-based contracts — recognise based on percentage of completion
• Bundled deals — split the transaction price between hardware and an ongoing support obligation

Step 1: Create a recognition contract

Go to Accounting > Revenue Recognition and click New Contract:

Field	Example
Customer	Sterling Healthcare Ltd
Contract value	36,000
Start date	01 Jan 2026
End date	31 Dec 2026
Recognition method	Straight-line

Step 2: Define performance obligations

A contract may have multiple distinct deliverables. Example for a 36,000 annual managed services contract:

• Obligation 1: Hardware supply — recognised on delivery date (point in time), value 6,000
• Obligation 2: Ongoing support — recognised monthly over 12 months, value 30,000

Allocate the transaction price between obligations (6,000 + 30,000 = 36,000).

Step 3: Review recognition schedule

Plenix generates a schedule showing how much revenue to recognise each period and the deferred revenue balance.

Monthly straight-line on a 30,000 support obligation over 12 months: recognise 2,500 per month, reducing the deferred revenue balance by 2,500 each period until it reaches zero in December.

Step 4: Post journal entries

Each month at period close, click Recognise. Plenix posts:

• Debit Deferred Revenue (balance sheet liability decreases)
• Credit Revenue (income statement increases)

Entries appear in Journal Entries and feed into your P&L automatically.

Suggestions

• Multi-year contracts: Set the end date 24 or 36 months out. The schedule and deferred revenue balance update automatically.
• Auditor export: Export the full recognition schedule as PDF evidence for year-end audit.
• Billing vs revenue: Invoicing timing is separate from recognition timing. A 12-month invoice issued in January does not mean all revenue is earned in January.

Where to go next

• Understand the whole module → How Accounting Works
• Next in this module → Reconcile a Bank Account
• File a VAT Return
• Create Journal Entries
• See where this fits in the bigger picture → How a Lead Becomes Cash