There are many ways discounts may be allocated for revenue recognition. Sometimes discounts are not essential for a business to track, and they recognize the already discounted item totals. For other businesses, it is important to track discount amounts, but it is not important when, so the discount may be recorded right away into the discounts given (not to the deferred revenue). However, there are cases when it is important for the business to track the discount and to do it at the same time when the product revenue is recognized. Sometimes the discount is allocated among all products, in other cases it is allocated into the most expensive product, etc. 

For now, Synder will work with two ways of discount setup, though more ways may be supported in the future.

Overview:

  1. Recognition of discounted totals
  2. Recognition of gross and discount
  3. How to change the discount recognition mode
  4. Discounts setup

Recognition of discounted totals

The revenue recognition will completely skip the discount recognition and will recognize discounted product totals across the billing period.

Invoice on 1 Jan 2023 for 6 months

Product 1 $600
Discount product -$60

Invoice total $540

Expected result:

Synder will recognize the already discounted total of the product $600-$60=$540
This means that every month, Synder will recognize 540/6=$90

TransactionDateProductAccountAmount
Invoice1 Jan 2023Product 1Deferred Revenue+600
Invoice1 Jan 2023Discount product Deferred Revenue-60
JE 131 Jan 2023Deferred Revenue-90
JE 131 Jan 2023Product 1 income+90
JE 228 Feb 2023Deferred Revenue-90
JE 228 Feb 2023Product 1 income+90
JE 331 Mar 2023Deferred Revenue-90
JE 331 Mar 2023Product 1 income+90
JE 430 Apr 2023Deferred Revenue-90
JE 430 Apr 2023Product 1 income+90
JE 531 May 2023Deferred Revenue-90
JE 531 May 2023Product 1 income+90
JE 630 Jun 2023Deferred Revenue-90
JE 630 Jun 2023Product 1 income+90

Note: no discounts given category will be in the profit and loss.

Recognition of gross and discount

Synder will recognize the full amount of the product across the billing period. The discount will also be recognized proportionally every month as another product but with the opposite sign.

Example:

Invoice on 1 Jan 2023 for 6 months

Product 1 $600
Discount product -$60

Invoice total $540

Expected result:

Synder will recognize the full amount of the product ($600) and the discount ($60) across 6 months.

This means that every month, Synder will recognize 600/6=$100 for the product and $60/6=$10 for the discount.

TransactionDateProductAccountAmount
Invoice1 Jan 2023Product 1Deferred Revenue+600
Invoice1 Jan 2023Discount product Deferred Revenue-60
JE 131 Jan 2023Deferred Revenue=-100+10
JE 131 Jan 2023Product 1 income+100
JE 131 Jan 2023Discount income-10
JE 228 Feb 2023Deferred Revenue=-100+10
JE 228 Feb 2023Product 1 income+100
JE 228 Feb 2023Discount income-10
JE 331 Mar 2023Deferred Revenue=-100+10
JE 331 Mar 2023Product 1 income+100
JE 331 Mar 2023Discount income-10
JE 430 Apr 2023Deferred Revenue=-100+10
JE 430 Apr 2023Product 1 income+100
JE 430 Apr 2023Discount income-10
JE 531 May 2023Deferred Revenue=-100+10
JE 531 May 2023Product 1 income+100
JE 531 May 2023Discount income-10
JE 630 Jun 2023Deferred Revenue=-100+10
JE 630 Jun 2023Product 1 income+100
JE 630 Jun 2023Discount income-10

Note: the product total and discount will be visible in the profit and loss.

The Journal Entry will look like:

Note: If you have multiple products, then sum up all credits for Deferred revenue in one line and all debits in another line.

The balance sheet records will look like:

There is an invoice for $4,226.85 for two yearly app subscriptions and the one-time setup fee with a 25% total discount. The subscription was purchased on 2 Aug, 2023.

Invoice:
Medium subscription cost is $665.16
Large subscription cost is $4,311.36
Product subtotal: $4976.52
25% discount: – $1244.13
Invoice total: $3732.39

Expected result:

Before calculating balance updates, let’s see how much the app will recognize a month for each product and for the discount:

Product nameTotalAmounts to be recognized monthly
Medium subscription665.16665.16/12=55.43
Large subscription4,311.364,311.36/12=359.28
Discount product1,244.131,244.13/12=103.68

These are balance updates you will get in the books:

Transaction typeTransaction dateLine ItemsAccountAmount
Invoice2 August, 2023Medium SubscriptionDeferred Revenue665.16
Invoice2 August, 2023Large SubscriptionDeferred Revenue4,311.36
Invoice2 August, 2023DiscountDeferred Revenue-1,244.13
Journal Entry 131 August, 2023Deferred Revenue=-55.43-359.28+103.68
Journal Entry 131 August, 2023Medium income+55.43
Journal Entry 131 August, 2023Large income+359.28
Journal Entry 131 August, 2023Discounts given-103.68
Journal Entry 230 September, 2023Deferred Revenue=-55.43-359.28+103.68
Journal Entry 230 September, 2023Medium income+55.43
Journal Entry 230 September, 2023Large income+359.28
Journal Entry 230 September, 2023Discounts given-103.68
Journal Entry 331 October, 2023Deferred Revenue=-55.43-359.28+103.68
Journal Entry 331 October, 2023Medium income+55.43
Journal Entry 331 October, 2023Large income+359.28
Journal Entry 331 October, 2023Discounts given-103.68
…

JE will look like this:

How to change the discount recognition mode

The discount recognition mode is set up once the revenue recognition is enabled for the organization/client business inside Synder.  In order to change the discount recognition mode, a new organization should be set up.

Follow the steps below to set up a new organization:

  1. Click the drop-down in the top-left corner of Synder’s account.
  2. Click “Create organization” (or “Add client”).

Discounts setup

1. Recognize discounted totals setup

  1. Only a default discount product should be mapped. The default discount product should have a deferred revenue account linked in accounting (QBO), and income account linked in Synder settings. 
  2. All invoices will have this default discount line item if the discount is recorded in the invoice.

2. Recognize gross and discount 

  1. Individual discounts from Stripe should be mapped to discount products from QBO. QBO discount products should have a deferred revenue account linked in accounting (QBO), and income account linked in Synder settings.
  2. The invoice will have an individual discount item recorded there according to the mapping.

Reach out to the Synder team via online support chat, phone, or email with any questions you have – we’re always happy to help you!


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