In accrual, revenue is recorded when a service is rendered, rather than when you get paid.
Once you select Accrual as your organization's accounting type in the Accounting and finance>Ledger Codes subtab, Amilia can help you set up and track revenue, asset and liability accounts balances on an accrual basis. You will also have access to journal entries, the deferred revenue report and a summary of general ledger account balances.
How it Works
1. Organize your Accounting Ledger Codes
Before creating your offerings to sell, you should configure your ledger accounts (i.e ledger codes) in the Accounting and Finance>Ledger Codes subtab. Ledger codes group items together in your financial reports to make accounting easier and more functional.
You will notice several default ledger accounts are already listed. Although you can modify their code or title, you cannot delete or archive these default ledger codes, as Amilia uses them when automatically transferring funds to the appropriate default accounts. You cannot assign these ledger codes to your offerings.
👉 When creating your offerings, you can only assign the default ledger account (000) or new ledger accounts you created in the Ledger Codes subtab.
Amilia creates journal entries as it moves funds in the back-office to the appropriate asset, liability and revenue accounts as services are rendered and payments are received. This is when you will see the default ledger codes in use.
2. Default Revenue, Asset and Liability Accounts
Amilia uses 3 types of accounts to track transactions in your journal entries:
Revenue accounts: Income (also called Revenue) or value your business earns (e.g. Product sales, Cancellation fees, Membership dues).
Asset accounts: Amounts that add value to your business (e.g. Cash, Accounts Receivable).
Liability accounts: Amounts your business owes or will owe (e.g. Sales tax, Deferred revenue, Credits due).
💵 Default Revenue Accounts
Several default revenue accounts are provided to track revenue, discounts, deferred discounts and scholarships.
Default Revenue account
All items sold by your organization are tracked as revenue. Any ledger code you create and assign to an item is tracked as revenue (when it is sold). If you do not assign a customized ledger code, Amilia automatically assigns your sold item to the default revenue ledger code (000).
All discounts applied from the discounts feature are tracked in this contra revenue ledger account. Contra revenue accounts have a debit balance instead of the usual credit balance, which means they reduce net income from your organization.
NOTE: The Default-Deferred Discounts ledger account exists to make sure that the timing of recognizing the discount matches the timing of revenue recognition.
👉 If you prefer your discounts to be tracked as debits in the ledger account you've assigned to the item being discounted, simply select the option below in the Accounting and Finance>Ledger Codes subtab and hit Save. The Default-Discounts and Default-Deferred Discounts ledger accounts will then be archived.
Default-Scholarships account (in BETA)
All applied scholarships are tracked in this contra revenue ledger account. Contra revenue accounts and expense accounts both cause the same result: they reduce net revenue. However, whereas an expense account is used to represent money flowing out of the business, a contra revenue account represents money that will never be collected by the business (e.g. a sales return). As a result, a contra revenue account is more aligned with how a typical scholarship program tracks funds.
💵 Default Asset Accounts
Two default asset accounts are provided to automatically track cash and accounts receivable.
This account records all payment types recorded in Amilia (online store, offline payments recorded by an administrator, installments and subscriptions).
Default-Accounts receivable account
This account records the value of money that customers have agreed to pay you. Anytime an invoice is not paid immediately, it is recorded as accounts receivable (e.g. installments). When an invoice is created, this account balance is debited. As the invoice is paid off, your Accounts receivable account adjusts automatically.
💵 Default Liability Accounts
Several default liability accounts are provided to track account deposits, deferred revenue, sales tax, and unused Multipass liabilities.
Default-Account deposit account
This account represents cash received in advance of delivering goods or services to a customer. Payments entered as account deposits, any unallocated payments, and credits left on a client’s account from a credit without refund are all considered liabilities that are tracked in this account.
Default-Deferred revenue account
This account tracks revenue from sales of products and services that are to be delivered or performed in the future. Until that time, it is considered deferred revenue. Deferred revenue is automatically recognized at the date of delivery or performance of service.
Click here to learn how revenue from each type of offering is deferred and recognized.
Sales tax account(s)
Taxes collected from sales are due to the government. As sales taxes are payable, they are tracked as liabilities in Amilia. Each sales tax that your organization configures and charges is automatically tracked to its own default ledger account (with the same name as the taxes you configured), meaning you do not need to create this ledger code yourself.
Default-Unused Multipass Liability account
Multipasses allow your clients to redeem passes that can be used in return for future service(s). This represents a liability to your organization since clients have paid for a service that has not yet been delivered.
Multipass liability is tracked in its own ledger account (separately from the deferred revenue account) because of Multipasses' unique function. Instead of deferring revenue for the sale of a Multipass based on a specific time frame or date when a service will be delivered, the liability is deferred to when a pass is redeemed. In other words, each time a pass is used, the value of that pass is recognized.
Additionally, the ledger account that is used to record the revenue depends on how the Multipass is used. Click here to learn how Multipass revenue is tracked.
3. View Journal Entries and other Reports
There are three reports designed for organizations that use accrual accounting.
In the Reports tab, click on Journal Entries in the Accrual accounting group. You can search for journal entries by date range, Account ID, invoice or transaction number.
Click on the export icon to the right to access:
Journal entries: This report displays a list of all journal entries including the debits and credits for each transaction, the transaction type, and the transaction date.
Summary of transactions: This report represents the change in balances for each general ledger account over the selected date range.
In the Reports tab, you can download your:
Deferred Revenue: This revenue recognition report separates data into revenue recognized in past periods, the current period and deferred until a later period. Revenue from the sale of an activity is recognized after each occurrence of the activity has passed.