The revenue recognition principle requires that revenue is recognized on the income statement in the period when realized and earned—not necessarily when cash is received. Realizable means that goods or services have been received by the customer, but payment for the good or service is expected later. Earned revenue accounts for goods or services that have been provided or performed, respectively.
In Stax Bill, the system tracks:
- The posting of invoices
- The collection of payments
- The recognition of revenue
Stax Bill offers the following revenue recognition methods:
Immediate- Revenue that will be earned immediately when the invoice is posted.
Manual Schedule- Revenue that will be earned at some point. This type is typically used for deposits.
Time-Based- Revenue that will be earned as time passes. This can be set for a period of time and to be calculated daily, monthly or yearly.
Milestone Schedule- Revenue will be earned as defined milestones are completed.
Revenue Recognition can be modified or overridden to accommodate for changes in the schedule or project.
ASC 606 is the revenue recognition standard that affects all businesses that enter into contracts with customers to transfer goods or services – public, private and non-profit entities. Both public and privately held companies should be ASC 606 compliant.
Developed by the Financial Accounting Standard’s Board (FASB) and International Accounting Standards Board (IASB), ASC 606 provides a framework for businesses to recognize revenue more consistently.
The standard’s purpose is to eliminate variations in the way businesses across industries handle accounting for similar transactions. This lack of standardization in financial reporting has made it difficult for investors and other consumers of financial statements to compare results across industries, and even between companies within the same industry.
The key takeaway from ASC 606 are the five key steps to revenue recognition:
- Identify the contract with a customer.
- Identify the performance obligations in the contract.
- Determine the transaction price.
- Allocate the transaction price to the performance obligations in the contract.
- Recognize revenue when or as the entity satisfies a performance obligation.
In Stax Bill, revenue recognition can be tailored to be compliant with ASC 606 using the revenue recognition settings within Stax Bill to meet the standards set in ASC 606.
Stax Bill offers the ability to customize revenue recognition based on time or on milestones. This allows the flexibility to adapt to how you recognize revenue. Stax Bill revenue recognition allows you to be ASC 606 compliant but does not enforce conformity to ASC 606.