How to Use the Revenue Recognition Module in Dynamics 365 for Finance and Operations

Posted on: January 3, 2020 | By: Christopher Rusing | Microsoft Dynamics AX/365

The relatively new revenue recognition has been available for a couple months now, but I haven’t seen much documentation on how it can be utilized. In a previous blog, I showed how to activate this module in your D365 environment. Assuming you have those steps completed, let’s see how this new functionality works within the system by looking at an end-to-end process of sales order creation to eventually recognizing deferred revenue. Please check out this page from MS if you need information regarding setup and configuration for the module.

Let’s start with creating a sales order. In each sales order line, you can specify the revenue schedule in this new drop-down field. The revenue schedules are user configurable.

Once you confirm the sales order, you will be able to see the revenue recognition options available from the Manage tab.

Looking at the ‘Expected revenue recognition schedule’ we can examine how much revenue we should assume to recognize per the revenue reschedule of that sales order line. The sales order line (and sales order total in this case) is $4,000. In the ‘Total recognizable amount’ field, you can see the amount of revenue that will be recognized each occurrence. The occurrence of when the revenue is recognized is based on the revenue schedule.

In this case, I have a 12 month schedule where revenue is recognized at the first of every month (with exception of the first month).

When we get around to invoicing the sales order, we can see that there is $4,0000 in deferred revenue and $60 in deferred COGS.

Now that the invoice is posted, let’s go to the revenue recognition schedule under the periodic tasks tab of the revenue recognition module. From there we can recognize the first occurrence of revenue. We are going to recognize that first month of revenue, $333.33 so we will click Create journal for the system to generate that entry.

I will choose to create the journal with the processing date as the revenue schedule date, which will use the ‘As of date’ under the Recognize Revenue As Of section. This is important because I’m telling the system that I will recognize all deferred revenue for every sales order line as of this date. This is the method you want to use if you want to recognize deferred revenue from prior months (assuming those dates are prior to 1/3/2020).

I went ahead and clicked OK to get create the journal. This creates a unique revenue recognition journal that can be found in the journal entries section of the module. This journal automatically debits deferred revenue and credits the revenue account based on posting. The $333.33 is the planned amount from the expected revenue recognition schedule and the revenue recognition schedule. The $5 is movement from deferred COGS to COGS (which is an optional setup depending on your sales order process).

The last step is to post this journal, which officially completes the process of recognizing the deferred revenue. If you need any additional help and/or you are looking for additional information, please feel free to reach out to us at info@loganconsulting.com or (312) 345-8817.

All the best!
Logan Consulting
www.loganconsulting.com