Deferred Revenue Accounting

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Epicor ERP

Deferred Revenue Accounting

Course10.0.700.2



Disclaimer

This document is for informational purposes only and is subject to change without notice. This document and itscontents, including the viewpoints, dates and functional content expressed herein are believed to be accurate as of itsdate of publication. However, Epicor Software Corporation makes no guarantee, representations or warranties with

regard to the enclosed information and specifically disclaims any applicable implied warranties, such as fitness for aparticular purpose, merchantability, satisfactory quality or reasonable skill and care. As each user of Epicor software islikely to be unique in their requirements in the use of such software and their business processes, users of this documentare always advised to discuss the content of this document with their Epicor account manager. All information containedherein is subject to change without notice and changes to this document since printing and other important informationabout the software product are made or published in release notes, and you are urged to obtain the current releasenotes for the software product. We welcome user comments and reserve the right to revise this publication and/ormake improvements or changes to the products or programs described in this publication at any time, without notice.The usage of any Epicor software shall be pursuant to an Epicor end user license agreement and the performance ofany consulting services by Epicor personnel shall be pursuant to Epicor's standard services terms and conditions. Usageof the solution(s) described in this document with other Epicor software or third party products may require the purchaseof licenses for such other products. Where any software is expressed to be compliant with local laws or requirementsin this document, such compliance is not a warranty and is based solely on Epicor's current understanding of such laws

and requirements. All laws and requirements are subject to varying interpretations as well as to change and accordinglyEpicor cannot guarantee that the software will be compliant and up to date with such changes. All statements ofplatform and product compatibility in this document shall be considered individually in relation to the products referredto in the relevant statement, i.e., where any Epicor software is stated to be compatible with one product and alsostated to be compatible with another product, it should not be interpreted that such Epicor software is compatiblewith both of the products running at the same time on the same platform or environment. Additionally platform orproduct compatibility may require the application of Epicor or third-party updates, patches and/or service packs andEpicor has no responsibility for compatibility issues which may be caused by updates, patches and/or service packsreleased by third parties after the date of publication of this document. Epicor® is a registered trademark and/ortrademark of Epicor Software Corporation in the United States, certain other countries and/or the EU. All othertrademarks mentioned are the property of their respective owners. Copyright © Epicor Software Corporation 2014.All rights reserved. No part of this publication may be reproduced in any form without the prior written consent of

Epicor Software Corporation.

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Contents

Deferred Revenue Accounting Course..................................................................................5

Before You Begin....................................................................................................................6

Audience.........................................................................................................................................................6Prerequisites....................................................................................................................................................6

Environment Setup..........................................................................................................................................7

Application Setup...................................................................................................................8

Company Configuration..................................................................................................................................8

Workshop - Note the Deferred Revenue Account......................................................................................8

Maintenance Programs....................................................................................................................................9

Fiscal Calendar Maintenance.....................................................................................................................9

Workshop - Create a Fiscal Calendar..................................................................................................9

Define a Fiscal Calendar.............................................................................................................9

Add a Fiscal Year......................................................................................................................10Generate Periods for a Fiscal Year.............................................................................................10

Add Another Year....................................................................................................................10

Generate Periods for a Fiscal Year.............................................................................................11

Revenue Amortization Maintenance.......................................................................................................11

Workshop - Create a Revenue Amortization Code...........................................................................13

Cross Referencing..........................................................................................................................................14

Product Group Maintenance...................................................................................................................14

Workshop - Create a Product Group................................................................................................14

Customer Maintenance..........................................................................................................................15

Workshop - Enter a Customer Record..............................................................................................15Enter Customer Details.............................................................................................................15

Select an RA Schedule for a Customer......................................................................................16

Reason Code Maintenance.....................................................................................................................16

Workshop - Enter a Reason Code....................................................................................................16

Daily DRA Processing............................................................................................................18

Revenue Recognition.....................................................................................................................................18

AR Invoice Entry......................................................................................................................................18

Workshop - Invoice a Customer.......................................................................................................18

Create a Group........................................................................................................................18

Enter an Invoice........................................................................................................................19Add a Deferred Revenue Line and Generate an Amortization Schedule.....................................19

Add Another Line.....................................................................................................................19

Review the Amortization Schedule............................................................................................20

Review the Invoice....................................................................................................................21

Post the Invoice Group.............................................................................................................21

Revenue Recognition..............................................................................................................................22

Workshop - Recognize Deferred Revenue........................................................................................22

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ContentsDeferred Revenue Accounting Course



AR Invoice Tracker..................................................................................................................................22

Workshop - Review the Amortization Schedule................................................................................23

Sales Analysis Report..............................................................................................................................23

Specialized DRA Processing.................................................................................................24

Posted Invoice Update....................................................................................................................................24

Workshop - Update a Posted Invoice.......................................................................................................24

Hold / Unhold Amortization Periods...............................................................................................................25

Workshop - Hold Amortization Periods...................................................................................................25

DRA Forecast Report......................................................................................................................................26

Workshop - Review the DRA Forecast Report..........................................................................................26

DRA Reconciliation Report.............................................................................................................................27

Workshop - Review the DRA Reconciliation Report..................................................................................27

Conclusion.............................................................................................................................28

Appendix...............................................................................................................................29

Deferred Revenue Accounting Transaction Hierarchy......................................................................................29

AR Invoice Entry......................................................................................................................................29

AR Invoice Entry - Actions.......................................................................................................................30

Revenue Recognition..............................................................................................................................31

Posted Invoice Update - Actions..............................................................................................................31

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Deferred Revenue Accounting CourseContents



Deferred Revenue Accounting Course

This course provides a clear perspective of the maintenance programs, concepts, processes, and reporting toolsthat relate to the Deferred Revenue Accounting module.

Deferred revenue stems from the accounting concept of revenue recognition, under which revenues are recognizedonly when the earnings process is complete.

If funds are received and no goods or services have been provided, the process is not complete and revenuecannot be recognized. In this case, a deferred revenue liability is recorded. Specifically, the deferred revenueaccount is credited and cash, or other assets, are debited.

Deferred revenue is recorded in specific industries under particular circumstances.

Example

1. A software company posts deferred revenue for a maintenance agreement under which services will beprovided over several years.

2. A golf club records deferred revenue for member initiation fees and recognizes the revenue as players

play their rounds.

Important The service contract and contract renewal functionality are not covered in this course. Referto the Field Service course for more information on these topics.

Upon successful completion of this course, you will be able to:

• Identify key maintenance programs that impact the deferred revenue accounting process.

• Identify the deferred revenue account for your company.

• Understand revenue amortization codes and schedules.

• Understand how fiscal calendars relate to revenue amortization codes and dates.

• Enable deferred revenue for product groups and customers.

• Post a deferred revenue invoice.

• Recognize revenue for a deferred revenue invoice based on the established amortization schedule.

• Update a posted invoice.

• Place multiple amortization periods on hold.

• Review useful deferred revenue reports and trackers.

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Deferred Revenue Accounting CourseDeferred Revenue Accounting Course



Before You Begin

Read this topic for information you should know in order to successfully complete this course.

Audience

Specific audiences will benefit from this course.

• CFO/Controller

• AR Clerk

Prerequisites

To complete the workshops in this course, the necessary modules must be licensed and operating in your trainingenvironment. For more information on the modules available, contact your Epicor Customer Account Managerat [email protected]. It is also important you understand the prerequisite knowledge contained in othervaluable courses.

• Financial Foundations - This course introduces you to the maintenance modules and programs in the Epicorapplication that set the basis for the financial activities within your company.

• General Ledger - This course provides a clear perspective of the maintenance programs, concepts, processes,and reporting tools you encounter as you work within the General Ledger (GL) module.

• Accounts Receivable - This course reviews the Accounts Receivable (AR) module's concepts and reporting

tools. Topics of discussion include maintenance program setup, various AR processes, and how to recognizethe impact these processes have on the general ledger (GL). Throughout the course, hands-on workshopsguide you through these topics.

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Deferred Revenue Accounting CourseBefore You Begin



Environment Setup

The environment setup steps and potential workshop constraints must be reviewed in order to successfullycomplete the workshops in this course.

Your Epicor training environment, in which the Epicor demonstration database is found, enables you to experienceEpicor functionality in action but does not affect data in your live, production environment.

The following steps must be taken to successfully complete the workshops in this course.

1. Verify the following or ask your system administrator to verify for you:

• Your Epicor training icon (or web address if you are using Epicor Web Access) points to yourEpicor training environment with the Epicor demonstration database installed. Do not completethe course workshops in your live, production environment.

Note It is recommended that multiple Epicor demonstration databases are installed. ContactSupport or Systems Consulting for billable assistance.

• The Epicor demonstration database is at the same service pack and patch as the Epicorapplication. Epicor's education team updates the Epicor demonstration database for each service packand patch. If your system administrator upgrades your Epicor application to a new service pack or patch,he or she must also download the corresponding Epicor demonstration database from EPICweb > Support> Epicor > Downloads and install it. If this is not performed, unexpected results can occur when completingthe course workshops.

• Your system administrator restored (refreshed) the Epicor demonstration database prior tostarting this course. The Epicor demonstration database comes standard with parts, customers, salesorders, and so on, already defined. If the Epicor demonstration database is shared with multiple users(that is, the database is located on a server and users access the same data, much like your live, productionenvironment) and is not periodically refreshed, unexpected results can occur. For example, if a courseworkshop requires you to ship a sales order that came standard in the Epicor demonstration database,

but a different user already completed this workshop and the Epicor demonstration database was notrestored (refreshed), then you will not be able to ship the sales order. Epicor's education team has writtenthe course workshops to minimize situations like this from occurring, but Epicor cannot prevent usersfrom manipulating the data in your installation of the Epicor demonstration database.

2. Log in to the training environment using the credentials manager/manager. If you are logged in to yourtraining environment as a different user, from the Options menu, select Change User.

3. From the Main menu, select the company Epicor Education (EPIC06).

4. From the Main menu, select the Main site.

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Before You BeginDeferred Revenue Accounting Course



Application Setup

This section reviews the key maintenance program configuration factors applicable to the Deferred RevenueAccounting (DRA) process. This course does not review and discuss all programs and fields within each program.

After you complete this course, refer to Application Help to learn more about programs or fields that were notmentioned. The Application Help documents and defines all programs, fields, and operations that relate to everymodule contained within your application.

Company Configuration

Use Company Configuration to define the default GL accounts to post deferred revenue.

Menu Path

Navigate to this program from the Main Menu:

• System Setup > Company/Site Maintenance > Company Configuration

Workshop - Note the Deferred Revenue Account

In this workshop, review the deferred revenue account defined for the company's AR Account GL Control Type.

Note If necessary, you can also specify GL controls for the Product Group, Customer, and Service Contractif you need deferred revenue to post to another deferred revenue account.

Navigate to Company Configuration.

Menu Path: System Setup > Company/Site Maintenance > Company Configuration

1. Navigate to the Modules > All Modules > GL Control > List sheet.

2. Highlight the AR Account GL Control Type.

3. In the GL Control Code field for AR Account, right-click Default and select Open With > GL ControlCode Entry.

GL Control Maintenance displays.

4. In the tree view, navigate to EPIC06 - Company Defaults > Account Context > Main Book > DeferredRevenue.

5. From the Account > Detail sheet, in the Account field, note the Deferred Revenue account:___________________________________.

6. Exit GL Control Maintenance. If the Return to the GL Control? message window displays, click No.

7. Exit Company Configuration.

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Deferred Revenue Accounting CourseApplication Setup



Maintenance Programs

This section reviews the most significant maintenance programs applicable to the DRA processing cycle.

In most cases, not all of the fields within the following master files are discussed in this course. For a full description

of all available fields, refer to the Application Help.

Fiscal Calendar Maintenance

Use Fiscal Calendar Maintenance to create and edit fiscal calendars.

You can use a fiscal calendar to structure amortization recognition dates.

Example If you want to recognize revenue on a weekly basis, you can set up a fiscal calendar with weeksas periods. Revenue will then be recognized at the end of every week.

Important The fiscal calendar defined for revenue amortization and selected for the Revenue AmortizationCode is not the fiscal calendar used for the GL books. The fiscal calendar defined for revenue amortization

is used only to generate the amortization periods based on amortization dates. Once the amortizationperiods are generated, the posting engine defines which periods are affected in the GL books.

Menu Path


• Financial Management > Accounts Payable > Setup > Fiscal Calendar

• Financial Management > Accounts Receivable > Setup > Fiscal Calendar

• Financial Management > Asset Management > Setup > Fiscal Calendar

• Financial Management > Deferred Revenue Accounting > Setup > Fiscal Calendar

• Financial Management > General Ledger > Setup > Fiscal Calendar

• Financial Management > Payroll > Setup > Fiscal Calendar

Workshop - Create a Fiscal Calendar

In this workshop, create a revenue amortization fiscal calendar for your company. After creating this calendar,add a fiscal year and generate periods for that year. The calendar you create uses months as amortization periodsThen, create an additional fiscal calendar for the following year.

Define a Fiscal Calendar

Navigate to Fiscal Calendar Maintenance.

Menu Path: Financial Management > Deferred Revenue Accounting > Setup > Fiscal Calendar

1. From the New menu, select New Fiscal Calendar.

2. In the first Calendar field, enter XXX-MO (where XXX are your initials).

3. In the second Calendar field, enter XXX Monthly Amortization Calendar (where XXX are your initials).

4. Click Save.

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Application SetupDeferred Revenue Accounting Course



Add a Fiscal Year

1. From the New menu, select New Fiscal Year.

2. Enter the following information:

DataFieldUse the current calendar year.Fiscal Year

Use the first day of the current year.Start Date

Use the last day of the current year.End Date

12Number of Periods

0Number of Closing Periods

3. Click Save.

Generate Periods for a Fiscal Year

1. From the Actions menu, select Generate Periods.

2. In the Start Date and End Date fields, verify the correct dates display.

If incorrect dates display, click the Cancel button and check the information on the Fiscal Year > Detailsheet. Correct any errors.

3. Verify the Period Duration fields display 1 and Month(s).

4. Click Generate.

A message displays that advises how many fiscal periods were created based on the information entered inthe Generate Periods window.

5. In the message window, click OK.

6. Click Save.

7. On the Fiscal Year > Fiscal Period > List sheet, review the periods generated.

Add Another Year

1. From the New menu, select New Fiscal Year.

2. Enter the following information:

DataField

Use the next calendar year.Fiscal Year

Use the first day of next year.Start Date

Use the last day of next year.End Date

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DataField

12Number of Periods

0Number of Closing Periods

3. Click Save.

Generate Periods for a Fiscal Year

1. From the Actions menu, select Generate Periods.

2. In the Start Date and End Date fields, verify the correct dates display.

If incorrect dates display, click the Cancel button and check the information on the Fiscal Year > Detailsheet. Correct any errors.

3. Verify the Period Duration fields display 1 and Month(s).

4. Click Generate.A message displays that advises how many fiscal periods were created based on the information entered inthe Generate Periods window.

5. In the message window, click OK.

6. Click Save.

7. On the Fiscal Year > Fiscal Period > List sheet, review the periods generated.

8. Exit Fiscal Calendar Maintenance.

Revenue Amortization Maintenance

Use Revenue Amortization Maintenance to define the duration of amortization, frequency of amortizationperiods, and recognition amount for each period.

There are various amortization calculation methods available that include:

• Equal Amounts - Using the equal amount calculation method, the same amount is recognized for eachamortization period.

Example The amortization duration is five months and the frequency is months. Using the equalamount calculation, 20% of the revenue will be recognized for each amortization period.

• Last Period - Using the last period calculation method, 100% of the revenue amount is recognized duringthe last amortization period.

• Actual Days - Using the actual days calculation method, revenue is recognized depending on the numberof days in the period and not on a fixed percentage basis. The revenue distribution depends on the invoicedate and the number of periods in the amortization schedule.

The following calculation is used:

(Days in Period) / (Sum of Amortization Period Days) * Invoice Amount

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Example A company wants to defer $1000 of revenue during three months using the actual dayscalculation method. The following fiscal periods are defined:

Days in thePeriod

EndStartPeriod

3101/31/201201/01/20121

2802/28/201202/01/20122

3103/31/201203/01/20123

3004/30/201204/01/20124

3105/31/201205/01/20125

3006/30/201206/01/20126

3107/31/201207/01/20127

3108/31/201208/01/20128

3009/30/201209/01/20129

3110/31/201210/01/201210

3011/30/201211/01/201211

3112/31/201212/01/201212

If the invoice starts to defer revenue the second month, the following revenue recognition occurs:

AmountCalculationRecognition DatePeriod

$314.6128 / (28+31+30) = 28 / 89 * $1000 =02/28/20122

$348.3131 / (28+31+30) = 31 / 89 * $1000 =03/31/20123

$337.0830 / (28+31+30) = 30 / 89 * $1000 =04/30/20124

On the other hand, if the invoice starts to defer revenue the ninth month, the following revenuerecognition occurs:

AmountCalculationRecognition DatePeriod

$329.6730 / (30+31+30) = 30 / 91 * $1000 =09/30/20129

$340.6631 / (30+31+30) = 31 / 91 * $1000 =10/31/201210

$329.6730 / (30+31+30) = 30 / 91 * $1000 =11/30/201211

Menu Path


• Financial Management > Deferred Revenue Accounting > Setup > Revenue Amortization Code

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Workshop - Create a Revenue Amortization Code

Your company decides to rent a large piece of equipment to one of your customers. The customer will be invoicedand the revenue will be deferred equally for each period over the length of the rental agreement. In this workshop,create a code to define revenue amortization over six periods.

Navigate to Revenue Amortization Maintenance.

Menu Path: Financial Management > Deferred Revenue Accounting > Setup > Revenue Amortization Code

1. Click New.

2. In the RA Code field, enter XXX-Code (where XXX are your initials).

3. In the Description field, enter XXX Code (where XXX are your initials).

4. In the Fiscal Calendar field, select XXX Monthly Amortization Calendar.

5. In the Duration field, enter 6.

6. In the Calculation Method field, select Equal Amounts.

7. Click Save.

8. Exit Revenue Amortization Maintenance.

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Cross Referencing

Use the cross referencing functionality to create connections between revenue amortization codes and productgroups, customers, and/or reason codes.

Creating a connection or link between a record and a revenue amortization code allows you to identify certainproducts or customers that knowingly require specific amortization settings. You can also use cross referencingto create reason codes that apply specifically to deferred revenue accounting circumstances. Creating these crossreferences increase efficiency and reduces the time used to enter revenue configuration details for a specificcustomer, or product group.

Product Group Maintenance

Use Product Group Maintenance to identify product groups that require deferred revenue.

Workshop - Create a Product Group

In this workshop, create a product group that utilizes deferred revenue functionality. Assign the RA code (orschedule) you created to the product group.

Note This workshop is stand alone and the product group created is not used later in the course.

Navigate to Product Group Maintenance.

Menu Path: Financial Management > Deferred Revenue Accounting > Setup > Product Group

1. From the New menu, select New Group.

2. In the Group field, enter XXXRent (where XXX are your initials).

3. In the Description field, enter XXX Rented Equipment (where XXX are your initials).

4. In the Sales Site field, verify Main site displays.

5. Select the Deferred Revenue check box.

6. In the RA Schedule field, select XXX Code (where XXX are your initials).

7. Click Save.

8. Exit Product Group Maintenance.

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Customer Maintenance

Use Customer Maintenance to enable deferred revenue billing for a customer.

You can also enable deferred revenue at the line level in AR Invoice Entry.

Menu PathNavigate to this program from the Main Menu:

• Financial Management > Accounts Receivable > Setup > Customer

• Financial Management > Deferred Revenue Accounting > Setup > Customer

• Financial Management > Multi-Site > Setup > Customer

• Production Management > Material Requirements Planning > Setup > Customer

• Sales Management > Customer Relationship Management > Setup > Customer

• Sales Management > EDI > Setup > Customer

• Sales Management > Order Management > Setup > Customer

• Sales Management > Quote Management > Setup > Customer

• Service Management > Field Service > Setup > Customer

For CRM users, the Main Menu appears as:

• Customer Relationship Management > Sales and Marketing Management > Setup > Customer

• Customer Relationship Management > EDI > Setup > Customer

• Customer Relationship Management > Order Management > Setup > Customer

• Customer Relationship Management > Quote Management > Setup > Customer

Workshop - Enter a Customer Record

In this workshop, enter a customer record and enable deferred revenue billing for the customer.

Enter Customer Details

Navigate to Customer Maintenance.

Menu Path: Financial Management > Deferred Revenue Accounting > Setup > Customer

1. From the New menu, select New Customer.

2. In the Customer field, enter XXX (where XXX are your initials).

3. In the Name field, enter XXX, Inc (where XXX are your initials).

4. In the Type field, select Customer.

5. In the available Address fields, enter an address for your new customer.

6. Click the Get Territory button.

7. Click Save.

8. Navigate to the Billing > Credit > Credit Detail sheet.

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9. Clear the Credit Hold check box.

10. Click Save.

11. Remain in Customer Maintenance.

Select an RA Schedule for a CustomerSelect the RA schedule you created in the Workshop - Create a Revenue Amortization Code for your customer.Your customer is renting a piece of equipment from your company over a six month time frame. You want todefer revenue over the length of the rental agreement.

1. Navigate to the Billing > Detail sheet.

2. In the Billing Terms section, select the Deferred Revenue check box.

3. In the RA Schedule field, select XXX Code (where XXX are your initials).

4. Click Save.

5. Exit Customer Maintenance.

Reason Code Maintenance

Use Reason Code Maintenance to create reason codes for deferred revenue.

If you need to place revenue amortization periods on hold, you can select the appropriate reason code inHold/Unhold Amortization Periods in the Hold Reason field.

Menu Path

Navigate to this program from the Main Menu:• Financial Management > Deferred Revenue Accounting > Setup > Reason Code

• Material Management > Inventory Management > Setup > Reason Code

• Production Management > Job Management > Setup > Reason Code

• Production Management > Quality Assurance > Setup > Reason Code

• Sales Management > Customer Relationship Management > Setup > Reason Code

• Service Management > Field Service > Setup > Reason Code


• Customer Relationship Management > Sales and Marketing Management > Setup > Reason Code

Workshop - Enter a Reason Code

In this workshop, enter a reason code for a suspended rental agreement. You will use this code in a later workshop.

Navigate to Reason Code Maintenance.

Menu Path: Financial Management > Deferred Revenue Accounting > Setup > Reason Code

1. In the Reason Type field, select Deferred Revenue.

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2. From the New menu, select New Reason Code.

3. In the Reason Code field, enter XXSUS (where XX are your first and last initials).

4. In the Description field, enter XXX Suspended Rental Agreement (where XXX are your initials).

5. Click Save.

6. Exit Reason Code Maintenance.

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Daily DRA Processing

This section of the course reviews Deferred Revenue Accounting (DRA) key processes that occur throughout aday. These processes include generating the amortization schedule, recognizing revenue for selected amortization,

and reviewing deferred revenue information for an invoice.Revenue Recognition

Deferred revenue must be recorded only when the revenue generation process has been substantially completed,and an exchange has taken place. The revenue recognition is recorded in the Deferred Revenue account; asrevenue is recognized, the revenue is passed to the Sales account.

Revenue Recognition

Deferred revenue is not yet revenue. It is an amount received by a company prior to it being earned. The amountunearned (and therefore deferred) as of the date of the financial statements should be reported as a liability.

Revenues are recognized when they are (1) realized or realizable, and are (2) earned (usually when goods aretransferred or services rendered), no matter when cash is received. In cash accounting - in contrast - revenuesare recognized when cash is received no matter when goods or services are sold.

AR Invoice Entry

You must enter and post an invoice to charge the customer an equipment rental fee.

Menu Path


• Financial Management > Accounts Receivable > General Operations > Invoice Entry

Workshop - Invoice a Customer

In this workshop, create an invoice to bill your customer for the full rental agreement amount. This amount willbe deferred based on the revenue amortization schedule defined earlier in the Workshop - Create a RevenueAmortization Code.

Navigate to AR Invoice Entry.

Menu Path: Financial Management > Accounts Receivable > General Operations > Invoice Entry

Create a Group

1. From the New menu, select New Group.

2. In the Group field, enter XXX (where XXX are your initials).

3. In the Invoice Date and Apply Date fields, select the first day of last month.

4. Click Save.

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Deferred Revenue Accounting CourseDaily DRA Processing



Enter an Invoice

1. From the New menu, select New Miscellaneous Invoice.

2. In the Sold To Customer field, enter XXX (where XXX are your initials) and press Tab.

Add a Deferred Revenue Line and Generate an Amortization Schedule

Enter a deferred revenue invoice line for the rental agreement amount. Your customer also wants to purchasecleaning services for the equipment on the same invoice. Enter a second line for the cleaning service.

1. From the New menu, select New Line.

2. In the Part/Rev field, enter Rental Fee.

3. In the Description field, enter Rental Fee.

4. In the Quantity field, enter 1.00.

5. In the Unit Price field, enter 1,200.00.

6. Select the Defer check box.

7. In the RA Code field, verify XXX Code (where XXX are your initials) defaults.

8. In the Start Date field, verify the invoice's date displays.

9. Click Save.

10. To the Generate Amortization Schedule? message, click Yes.

Note If an error message appears, click OK to dismiss it and generate the amortization schedule.

11. Click the Get Default button to pull in the default GL account.

Verify the Deferred Revenues account displays.

12. Click Save.

Add Another Line

Enter a second non-deferred revenue line for the cleaning service.

1. From the New menu, select New Line.

2. In the Part/Rev field, enter Cleaning Service.

3. In the Description field, enter Cleaning Service.

4. In the Quantity field, enter 1.00.

5. In the Unit Price field, enter 20.00.

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Daily DRA ProcessingDeferred Revenue Accounting Course



6. Click Save.

7. Click the Get Default button to pull in the default GL account.

Verify the Sales Default account displays.

8. Verify the Defer check box is clear.

9. Click Save.

10. From the Actions menu, select Group > Edit List.

11. In the Report Style field, select Standard - SSRS.

12. In the Invoice Entry - Group Edit List window, click Print Preview.

13. In the AR Invoice Edit List, in the GL Account Recap section, verify the following:

• The Accounts Receivable account has been debited $1220, which reflects the sum of the two invoicelines.

• The Deferred Revenues account has been credited $1200, which reflects the amount of the deferred

revenue invoice line for the rental agreement.

• The Sales account has been credited a net amount of $20, which reflects the amount of the non-deferredrevenue invoice line for the cleaning services.

14. Exit AR Invoice Edit List and Invoice Entry - Group Edit List.

15. Note the invoice number: ______________________

16. Click Save.

17. Remain in AR Invoice Entry.

Review the Amortization Schedule

You can update revenue amortizations "on the fly" (percentages, amounts, dates). Use the Actions > Line >Revenue Amortization > Restore Amortization Schedule command to restore the schedule back to theoriginal schedule from the revenue amortization code.

1. In the tree view, select Part:Rental Fee.

2. Navigate to the Line > Amortization sheet.

3. In the Totals section, note the Revenue field contains the full invoice amount and the amount remainsUnrecognized.

4. In the Revenue Amortization Schedule grid, verify the following:

• In the Fiscal Period column, six fiscal periods display.

• In the Percent column, 16.666667 displays for the each of the six periods.

• In the Amort. Amount column, 200.00 displays for the each of the six periods.

Note If there is a rounding difference, the difference is recognized in the last amortization period.The application's logic always calculates the percentage first and then multiplies the percentage bythe revenue amount.

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5. Remain in AR Invoice Entry.

Review the Invoice

1. From the Actions menu, select Group > Print Invoices.


3. Click Print Preview.

4. Review the invoice that displays.

5. Exit the AR Invoice Form and the Print Group window.

Post the Invoice Group

1. From the Actions menu, select Group > Post.

The AR Invoice Post Process window displays.

2. Click Submit.

3. Close the AR Invoice Post Process window

4. Exit AR Invoice Entry.

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Revenue Recognition

Use Revenue Recognition to recognize revenue for selected amortization periods.

From the Actions menu, select Get Amortizations to populate the Amortizations grid with available invoices.You can highlight invoices for which you want to post amortization amounts. When the process is submitted,the appropriate GL journals are created and revenue moves from the deferred revenue account to the corresponding

sales account.

Menu Path


• Financial Management > Deferred Revenue Accounting > General Operations > Revenue Recognition

Workshop - Recognize Deferred Revenue

You receive the first two rental payments from your customer, representing last months rental payment and thecurrent months rental payment (period 1 and 2). In this workshop, recognize deferred revenue for the first two

periods of the RA schedule.Navigate to Revenue Recognition.

Menu Path: Financial Management > Deferred Revenue Accounting > General Operations > Revenue Recognition

1. On the Detail sheet, in the As of Date field, select the last day of the current month.

2. Navigate to the Filter > Customer sheet.

3. Click the Customer button to search for and select XXX, Inc (where XXX are your initials).

4. Navigate to the Detail sheet.

5. From the Actions menu, select Get Amortization.

6. In the Amortizations grid, highlight the invoice amortization sequences 1/6 and 2/6.

7. Click Submit.

The invoice is removed from the grid.

8. Exit Revenue Recognition.

AR Invoice Tracker

Use the AR Invoice Tracker to view invoice details.

Use the Line > Amortization sheet to view deferred revenue information for an invoice. Review the RevenueAmortization Schedule grid for amortization the period status and details.

Menu Path


• Executive Analysis > Trackers > A/R Invoice Tracker

• Financial Management > Accounts Receivable > General Operations > Invoice Tracker

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• Financial Management > Deferred Revenue Accounting > General Operations > Invoice Tracker

• Sales Management > Customer Relationship Management > General Operations > Invoice Tracker

• Sales Management > Order Management > General Operations > Invoice Tracker

• Service Management > Field Service > General Operations > Invoice Tracker


•

Customer Relationship Management > Sales and Marketing Management > General Operations > InvoiceTracker

• Customer Relationship Management > Order Management > General Operations > Invoice Tracker

Workshop - Review the Amortization Schedule

Once the deferred revenue for the first two period is recognized, use the AR Invoice Tracker to review recognizedamortization periods and amounts.

Navigate to the AR Invoice Tracker.

Menu Path: Financial Management > Deferred Revenue Accounting > General Operations > Invoice Tracker

1. On the Summary sheet, in the Invoice field, enter or search for and select the invoice you created.


3. In the Recognized field, verify 400.00 displays.

4. In the Revenue Amortization Schedule grid, verify the first and second fiscal periods are Posted.

5. Exit the AR Invoice Tracker.

Sales Analysis Report

Use the Sales Analysis Report to view sales that occurred during a specific date range. This report prints detailsfor each invoice line. When an invoice is consolidated, the report groups lines together for each Sold To customer.

Select the Deferred Revenue check box to display deferred revenue invoices in the date range.

Menu Path


• Financial Management > Accounts Receivable > Reports > Sales Analysis

• Financial Management > Deferred Revenue Accounting > Reports > Sales Analysis

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Specialized DRA Processing

This section of the course discusses special deferred revenue accounting capabilities of the Epicor application.

Posted Invoice Update

Use Posted Invoice Update to review and modify revenue amortization schedules for posted invoices. You canedit amortization dates, percentages, and amounts for posted invoices.

Select the Hold check box to place a period on hold. If a period is on hold, it is not recognized until the Holdstatus is removed.

From the Actions menu, use the Revenue Amortization > Post to Deferred Revenue action to clear the salesaccount and charge the deferred revenue account.

Important If an amortization period has been recognized, no changes can be made to the date, percentage,or amount. However, you can update dates, amounts, and percentages for remaining unrecognized periodsin the amortization schedule.

If you want to change a scheduled amortization date, the new date must fall within the same fiscal period.

Menu Path


• Financial Management > Accounts Receivable > General Operations > Posted Invoice Update

• Financial Management > Deferred Revenue Accounting > General Operations > Posted Invoice Update

Workshop - Update a Posted Invoice

You are renegotiating the terms of the rental agreement with XXX Inc. In this workshop, place the next periodof your customer's rental agreement on hold until further notice.

Navigate to Posted Invoice Update.

Menu Path: Financial Management > Deferred Revenue Accounting > General Operations > Posted InvoiceUpdate

1. In the Invoice field, enter or search for and select the invoice you previously posted.


3. For the third amortization period, select the Hold check box.

4. In the Reason field, select XXX Suspended Rental Agreement (where XXX are your initials).

5. In the Hold Text field, enter Negotiating Terms.

6. Click Save.

7. Exit Posted Invoice Update.

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Hold / Unhold Amortization Periods

Use Hold / Unhold Amortization Periods to place a number of amortization periods on hold or unhold. Revenueis not recognized for periods that are on hold.

Enter a hold reason and necessary text that relates to the hold.

Workshop - Hold Amortization Periods

The renegotiation process with XXX Inc is taking more time than planned and the current period on hold is aboutto end. Since you are not sure when the agreement will become active again, place the remaining rental agreementperiods on hold until further notice.

Navigate to Hold / Unhold Amortization Periods.

Menu Path: Financial Management > Deferred Revenue Accounting > General Operations > Hold/UnholdAmortization Periods

1. In the Apply Date field, select the last day of the last period of the rental agreement.For example, 12/31/2013.

2. In the Hold Reason field, select XXX Suspended Rental Agreement (where XXX are your initials).

If you clear the Hold check box for a period, this field automatically clears.

3. In the Hold Text field, enter Rental agreement is on hold.

4. Navigate to the Filter > Customer sheet.

5. Click the Customer button to search for and select XXX, Inc (where XXX are your initials).

6. Navigate to the Selection sheet.

7. In the Get Amortization Option field, select All Records Not on Hold.

8. From the Actions menu, select Get Amortizations.

9. In the Amortization Periods grid, select the Selected check box for each of your invoice's amortizationperiods.

10. Click Submit.

The invoice clears from the Amortizations grid.

11. Exit Hold / Unhold Amortization Periods.

Tip You can use the AR Invoice Tracker's Line > Amortization sheet to verify the amortizationperiods have been put on hold.

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DRA Forecast Report

Use the DRA Forecast Report to review a forecast of the revenue to be recognized in future periods.

The report is grouped by invoice. You can view the line number, total revenue of the invoice, and amount

remaining to be recognized for the invoice.Use the Selection sheet to select the report parameters. Use the Filter sheet(s) to select specific records to includeon the report. For more information, refer to the Filters Overview topic in the Application Help.

Important For more information on how to review any report status you print, preview, or generate, referto the System Monitor Overview topic in the Application Help.

Menu Path


• Financial Management > Deferred Revenue Accounting > Reports > DRA Forecast

Workshop - Review the DRA Forecast Report

In this workshop, run the DRA Forecast Report to review a forecast of the revenue to be recognized in futureperiods. The future periods are specified in the XXX Monthly Amortization Calendar created in the Workshop -Create a Fiscal Calendar.

Navigate to the DRA Forecast Report.

Menu Path: Financial Management > Deferred Revenue Accounting > Reports > DRA Forecast

1. In the As of Date field, select the first day of last month.

2. In the Report Periods field, select XXX Monthly Amortization Calendar (where XXX are your initials).

3. In the Hold Period Option field, select Include on Hold.



6. In the Deferred Revenue Report window, note the following:

• The report is grouped by invoice group.

• You can recognize the line number, total revenue of the invoice, and amount remaining to be recognizedfor the invoice.

•

You can view the amount to be recognized in each of the four columns.There are always four columns, or buckets, for each report (for example, 03/31/2013, 04/30/2013,05/31/2013, and 06/30/2013). You can view the amount to be recognized for each of the four columnsand a Period Total which reflects the total deferred revenue to be recognized in the period.

• You can view the grand total of deferred revenue for the report date range and the total amount to berecognized in each date column.

7. Close the Deferred Revenue Report window and exit Deferred Revenue Report.

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DRA Reconciliation Report

Use the DRA Reconciliation Report to review discrepancies between revenue that should be posted at a specifieddate and the actual date when the revenue is recognized. The details of the report are sorted per GL account.

Use the Selection sheet to select the report parameters. Use the Filter sheet(s) to select specific records to includeon the report. For more information, refer to the Filters Overview topic in the Application Help.

Menu Path


• Financial Management > Deferred Revenue Accounting > Reports > DRA Reconciliation

Workshop - Review the DRA Reconciliation Report

In this workshop, review the grand total of deferred revenue, the amount remaining to be recognized, and thesales and deferred revenue accounts.

Navigate to the DRA Reconciliation Report.

Menu Path: Financial Management > Deferred Revenue Accounting > Reports > DRA Reconciliation

1. In the Book field, select Main Book.

2. Verify the current date displays in the As of Date field.

3. In the Report Periods field, select XXX Monthly Amortization Calendar (where XXX are your initials).

4. In the Hold Period Option field, select Include On Hold.



7. View the grand total of deferred revenue, the amount remaining to be recognized, and the sales and deferredrevenue accounts.

8. Exit the Deferred Revenue Reconciliation Report and the Deferred Revenue Reconciliation Report window.

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Conclusion

Congratulations! You have completed the Deferred Revenue Accounting course.

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Appendix

The Deferred Revenue Accounting Course appendix contains a copy of the Epicor ERP Deferred Revenue AccountingTransaction Hierarchy.

The Deferred Revenue Accounting Transaction Hierarchy assumes your company uses an unmodified version ofthe Standard posting rules delivered with the Epicor application. If you use the Extended posting rules, or if youneed information regarding an Deferred Revenue Accounting transaction that is not listed on this hierarchy, referto the GL Transaction Type Maintenance topic in the Application Help to review the posting rule operationdetails.

Deferred Revenue Accounting Transaction Hierarchy

This hierarchy is a summary of common general ledger (GL) transactions posted from within the Deferred Revenue

Accounting (DRA) module.Important This hierarchy assumes your company uses an unmodified version of the Standard postingrules delivered with the Epicor application. If you use the Extended posting rules, or if you need informationregarding a Deferred Revenue Accounting transaction that is not listed on this hierarchy, refer to the GLTransaction Type Maintenance topic in the Application Help to review the posting rule operation details.

AR Invoice Entry

CreditDebitFunctionTransaction/Program

AR Invoice Entry

Sales AccountReceivables Account

Add MiscellaneousInvoice

1. Product Group GLControl - Product Group

1. AR Account GL Control -Customer

2. AR Account GL Control- Customer

2. AR Account GL Control -Company Config

3. AR Account GL Control- Company Config

* Deferred RevenueAccount

Receivables Account

1. AR Account GL Control -Customer

Add Advanced BillingInvoice

*A selected DeferredRevenue check box



credits the DeferredRevenue Account asdisplayed.


** Sales Account** A cleared DeferredRevenue check box 1 . Product Group GL

Control - Product Groupcredits the Sales Accountas displayed.

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AppendixDeferred Revenue Accounting Course






Receivables Account* Deferred RevenueAccount

Add Advanced BillingCredit Memo

1. AR Account GL Control- Customer1. AR Account GL Control -

Customer

*A selected DeferredRevenue check box debits

2. AR Account GL Control- Company Config2. AR Account GL Control -

Company Configthe Deferred RevenueAccount as displayed.

** A cleared DeferredRevenue check box debits

** Returns Account


the Returns Account as

displayed.

2. AR Account GL Control -

Customer


Receivables AccountDeferred RevenueAccount

Add a Service Contractwith Deferred Revenue

1. AR Account GL Control- Customer1. Field Service GL Control -

Service Contract

Note For moreinformation on theDeferred Revenue 2. AR Account GL Control

- Company Config2. AR Account GL Control -Customer

Service Contractprocess, refer tothe Field Service

course.

AR Invoice Entry - Actions


AR Invoice Entry -Actions

Receivables AccountDeferred Revenue

Account

Post an Invoice withDeferred Revenue


Customer2. AR Account GL Control- Company Config2. AR Account GL Control -

Company Config

Receivables AccountDeferred RevenuePost a Credit Memowith Deferred Revenue

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Deferred Revenue Accounting CourseAppendix





1.AR Account GL Control -Customer



Revenue Recognition


Revenue Recognition

Sales AccountDeferred RevenueAccount

Recognize DeferredRevenue


Customer2. AR Account GL Control

- Company Config2. AR Account GL Control -Company Config

Posted Invoice Update - Actions


Posted Invoice Update -Actions

Referred RevenueAccount

Sales Account


Post to DeferredRevenue


2. AR Account GL Control -Customer 2. AR Account GL Control

- Company Config3. AR Account GL Control -Company Config

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AppendixDeferred Revenue Accounting Course



Additional information is available at the Education andDocumentation areas of the EPICweb Customer Portal. To access

this site, you need a Site ID and an EPICweb account. To create anaccount, go to http://support.epicor.com.

http://support.epicor.com/

http://support.epicor.com/

Deferred Revenue Accounting

Documents

Transcript of Deferred Revenue Accounting