================= Deferred revenues ================= **Deferred revenues**, or **unearned revenue**, are payments made in advance by customers for products yet to deliver or services yet to render. Such payments are a **liability** for the company that receives them since it still owes its customers these products or services. The company cannot report them on the current **Profit and Loss statement**, or *Income Statement*, since the payments will be effectively earned in the future. These future revenues must be deferred on the company's balance sheet until the moment in time they can be **recognized**, at once or over a defined period, on the Profit and Loss statement. For example, let's say we sell a five-year extended warranty for $ 350. We already receive the money now but haven't earned it yet. Therefore, we post this new income in a deferred revenue account and decide to recognize it on a yearly basis. Each year, for the next 5 years, $ 70 will be recognized as revenue. Odoo Accounting handles deferred revenues by spreading them in multiple entries that are automatically created in *draft mode* and then posted periodically. .. note:: The server checks once a day if an entry must be posted. It might then take up to 24 hours before you see a change from *draft* to *posted*. Prerequisites ============= Such transactions must be posted on a **Deferred Revenue Account** rather than on the default income account. Configure a Deferred Revenue Account ------------------------------------ To configure your account in the **Chart of Accounts**, go to :menuselection:`Accounting --> Configuration --> Chart of Accounts`, click on *Create*, and fill out the form. .. image:: deferred_revenues/deferred_revenues01.png :align: center :alt: Configuration of a Deferred Revenue Account in Odoo Accounting .. note:: This account's type must be either *Current Liabilities* or *Non-current Liabilities* Post an income to the right account ----------------------------------- Select the account on a draft invoice ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ On a draft invoice, select the right account for all the products of which the incomes must be deferred. .. image:: deferred_revenues/deferred_revenues02.png :align: center :alt: Selection of a Deferred Revenue Account on a draft invoice in Odoo Accounting Choose a different Income Account for specific products ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Start editing the product, go to the *Accounting* tab, select the right **Income Account**, and save. .. image:: deferred_revenues/deferred_revenues03.png :align: center :alt: Change of the Income Account for a product in Odoo .. tip:: It is possible to automate the creation of revenue entries for these products (see: `Automate the Deferred Revenues`_). Change the account of a posted journal item ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ To do so, open your Sales Journal by going to :menuselection:`Accounting --> Accounting --> Sales`, select the journal item you want to modify, click on the account, and select the right one. .. image:: deferred_revenues/deferred_revenues04.png :align: center :alt: Modification of a posted journal item's account in Odoo Accounting Deferred Revenues entries ========================= Create a new entry ------------------ A **Deferred Revenues entry** automatically generates all journal entries in *draft mode*. They are then posted one by one at the right time until the full amount of the income is recognized. To create a new entry, go to :menuselection:`Accounting --> Accounting --> Deferred Revenues`, click on *Create*, and fill out the form. Click on **select related purchases** to link an existing journal item to this new entry. Some fields are then automatically filled out, and the journal item is now listed under the **Related Sales** tab. .. image:: deferred_revenues/deferred_revenues05.png :align: center :alt: Deferred Revenue entry in Odoo Accounting Once done, you can click on *Compute Revenue* (next to the *Confirm* button) to generate all the values of the **Revenue Board**. This board shows you all the entries that Odoo will post to recognize your revenue, and at which date. .. image:: deferred_revenues/deferred_revenues06.png :align: center :alt: Revenue Board in Odoo Accounting What does "Prorata Temporis" mean? ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The **Prorata Temporis** feature is useful to recognize your revenue the most accurately possible. With this feature, the first entry on the Revenue Board is computed based on the time left between the *Prorata Date* and the *First Recognition Date* rather than the default amount of time between recognitions. For example, the Revenue Board above has its first revenue with an amount of $ 4.22 rather than $ 70.00. Consequently, the last entry is also lower and has an amount of $ 65.78. Deferred Entry from the Sales Journal ------------------------------------- You can create a deferred entry from a specific journal item in your **Sales Journal**. To do so, open your Sales Journal by going to :menuselection:`Accounting --> Accounting --> Sales`, and select the journal item you want to defer. Make sure that it is posted in the right account (see: `Change the account of a posted journal item`_). Then, click on *Action*, select **Create Deferred Entry**, and fill out the form the same way you would do to `create a new entry`_. .. image:: deferred_revenues/deferred_revenues07.png :align: center :alt: Create Deferred Entry from a journal item in Odoo Accounting Deferred Revenue Models ======================= You can create **Deferred Revenue Models** to create your Deferred Revenue entries faster. To create a model, go to :menuselection:`Accounting --> Configuration --> Deferred Revenue Models`, click on *Create*, and fill out the form the same way you would do to create a new entry. .. tip:: You can also convert a *confirmed Deferred Revenue entry* into a model by opening it from :menuselection:`Accounting --> Accounting --> Deferred Revenues` and then, by clicking on the button *Save Model*. Apply a Deferred Revenue Model to a new entry --------------------------------------------- When you create a new Deferred Revenue entry, fill out the **Deferred Revenue Account** with the right recognition account. New buttons with all the models linked to that account appear at the top of the form. Clicking on a model button fills out the form according to that model. .. image:: deferred_revenues/deferred_revenues08.png :align: center :alt: Deferred Revenue model button in Odoo Accounting .. _deferred-revenues-automation: Automate the Deferred Revenues ============================== When you create or edit an account of which the type is either *Current Liabilities* or *Non-current Liabilities*, you can configure it to defer the revenues that are credited on it automatically. You have three choices for the **Automate Deferred Revenue** field: #. **No:** this is the default value. Nothing happens. #. **Create in draft:** whenever a transaction is posted on the account, a draft *Deferred Revenues entry* is created, but not validated. You must first fill out the form in :menuselection:`Accounting --> Accounting --> Deferred Revenues`. #. **Create and validate:** you must also select a Deferred Revenue Model (see: `Deferred Revenue Models`_). Whenever a transaction is posted on the account, a *Deferred Revenues entry* is created and immediately validated. .. image:: deferred_revenues/deferred_revenues09.png :align: center :alt: Automate Deferred Revenue on an account in Odoo Accounting .. tip:: You can, for example, select this account as the default **Income Account** of a product to fully automate its sale. (see: `Choose a different Income Account for specific products`_). .. seealso:: * :doc:`../get_started/chart_of_accounts` * `Odoo Academy: Deferred Revenues (Recognition) `_