What is Accrual Revenue Recognition?

Accrual is a method of revenue recognition that recognizes revenue based on billable costs as they occur, regardless of whether they have been billed. The amount of revenue you can recognize is limited by the total contract amount. With this method, you can calculate revenue in the Billing and Revenue Management application by summarizing for a customer or activity all billable transactions for which revenue has not yet been recognized.

Revenue = Life to date accrued revenue costs - Revenue recognized to date

Example - Accrual Revenue Recognition

  • MOP has entered into a contract for a six-month project.

  • The estimated costs are $400,000.

  • They plan to use Cost Plus billing, with a 20% markup to determine billable amounts.

    • To date:

    • $50,000 in billable costs have been incurred, and

    • Customer has not yet been billed.

    • They are ready to recognize $60,000 in revenue. ($50,000 billable x 1.2 (20% markup))

    • When BR130 is run:

    • Revenue is credited and

    • Earned/Unbilled is debited.

Accrual revenue recognition can be used with any billing method. During setup, you determine if revenue will follow the originator of expense or post to a specific GL code within the contract.