> ## Documentation Index
> Fetch the complete documentation index at: https://docs.fincelo.app/llms.txt
> Use this file to discover all available pages before exploring further.

# Deferred Revenue

> How Fincelo tracks and releases deferred revenue under ASC 606 and IFRS 15.

## Overview

Deferred revenue represents cash received but not yet earned. Fincelo tracks the full deferred revenue balance per customer, per contract, and releases it straight-line over the service period.

***

## How Deferred Revenue Works in Fincelo

### On Invoice

When an invoice is raised for an annual subscription paid upfront:

* Cash received: ₹12,00,000
* Revenue earned (Month 1): ₹1,00,000
* **Deferred revenue created: ₹11,00,000**

### Monthly Release

Each month, Fincelo automatically:

1. Calculates the monthly recognition amount (ARR ÷ 12)
2. Releases that amount from deferred revenue to recognised revenue
3. Updates the balance
4. Posts the journal entry

### On Contract End

By the last day of the contract, deferred revenue balance = ₹0. Fully released.

***

## Partial Month Proration

For contracts that start or end mid-month, Fincelo uses daily proration:

```
Daily rate = Annual Value ÷ 365
Partial month amount = Daily rate × Days in service
```

***

## Deferred Revenue Report

**Reports → Deferred Revenue** shows:

* Opening balance per customer
* Additions (new invoices)
* Releases (recognised this period)
* Closing balance
* Expected release schedule (next 12 months)

This is a CA/auditor-ready report.

***

## Multi-Year Contracts

For 3-year deals paid annually:

* Year 1 cash → Year 1 deferred → releases over 12 months
* Year 2 invoice raised at Year 1 end → new deferred created
* Each year treated independently

***

## Refunds and Credit Notes

If a contract is terminated early and a refund is issued:

* Deferred revenue balance is reversed
* Credit note raised for unearned amount
* Revenue recognition stops at termination date
* CFO selects View B to record this treatment