What is Deferred Revenue Recognition? (ASC 606 Explained)

Introduction

Deferred revenue recognition is one of the most important—and misunderstood—accounting concepts for event-based businesses. If you've ever wondered why your books don't match your cash flow, or why your accountant keeps asking about "revenue earned vs. recognized," this guide is for you.

What is Deferred Revenue?

Deferred revenue occurs when a customer pays for a service or product before you deliver it. Under ASC 606 (the current accounting standard), you cannot recognize that revenue until the service is delivered or the event occurs.

Real Example: Golf School

A customer books a $500 lesson scheduled for next month and pays today:

• Today: Cash In = $500 (balance sheet: Cash +$500, Deferred Revenue +$500)
• Lesson Day: Revenue Recognized = $500 (balance sheet: Deferred Revenue -$500, Revenue +$500)

Why ASC 606?

ASC 606 ensures consistency across industries and makes financial statements comparable. It also prevents companies from recognizing revenue too early (which inflates profitability).

How Reschedly Automates It

Instead of manually tracking event dates and making journal entries, Reschedly:

1. Records deferred revenue automatically when a customer books
2. Runs a daily cron job to check event dates
3. Recognizes revenue automatically when the event date passes
4. Generates accounting export ready for QuickBooks or Xero

Conclusion

Deferred revenue recognition is required by law, but it doesn't have to be manual. Reschedly handles it automatically so you can focus on growing your business.