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

# Overview

> Streamline your month end process with automated journal reports

<img src="https://mintcdn.com/sequence/mEkhIlLyJGyDgjJd/images/illustration/revrec_cover.png?fit=max&auto=format&n=mEkhIlLyJGyDgjJd&q=85&s=d64be4d875b4f00ab04964a7e6743dc8" alt="Revenue recognition" width="1500" height="500" data-path="images/illustration/revrec_cover.png" />

Sequence's revenue recognition module produces the journals that move billed amounts into recognized revenue across the service period. The primary output is a monthly journal report you can post directly into your general ledger.

Reports can be customized in granularity and format to match your accounting conventions and downstream system.

<Frame>
  <img src="https://mintcdn.com/sequence/kw8O-QAyxJLIUkK_/images/product/revrec/overview.png?fit=max&auto=format&n=kw8O-QAyxJLIUkK_&q=85&s=3766d1c2cfdbd752b7d08dead5c785ba" alt="Revenue recognition home" width="3248" height="2112" data-path="images/product/revrec/overview.png" />
</Frame>

Sequence implements revenue recognition in line with ASC 606 (US GAAP) and IFRS 15 (IFRS), with equivalent treatment under FRS 102 §23 for UK SMEs.

## Key concepts

**In-advance and in-arrears billing**

Revenue recognition distinguishes between when customers are billed and when revenue is earned:

* **In-advance billing**: customers are charged upfront and revenue is recognized over time as services are delivered (e.g., annual subscriptions paid upfront).
* **In-arrears billing**: services are delivered first and billed afterwards, with revenue recognized as services are delivered (e.g., monthly usage-based billing).

**Recognition methods**

Sequence supports four recognition methods:

* **Straight-line**: Revenue divided evenly across the service period (most common).
* **Usage-based**: Revenue recognized based on actual usage each period.
* **Point-in-time**: Full amount recognized on a specific date (e.g., implementation fees).
* **Milestone**: Revenue recognized only when milestones are marked as complete.

For straight-line specifically, you can choose between three **allocation strategies**, which differ only in how the part-months at the start and end of a contract are prorated. See [Recognition methods](/revenue-recognition/recognition-methods#allocation-methods) and [Settings](/revenue-recognition/settings#allocation-strategy).

**Revenue accounts**

Sequence tracks revenue through four main accounts:

* **Billed Revenue**: Amounts invoiced to customers.
* **Recognized Revenue**: Revenue earned through service delivery.
* **Deferred Revenue**: Invoiced amounts not yet earned (for advance billing).
* **Unbilled Revenue**: Earned revenue not yet invoiced (for arrears billing).

**Account period locking**

Once a month is closed, Sequence can prevent any further journals from posting into it. Two methods are supported: lock against each invoice's accounting date, or set a single fixed lock date for the whole account. See [Settings](/revenue-recognition/settings#account-period-locking).

**Credit note behaviour**

Credit notes either **cancel** future obligations or **adjust** previously recognized revenue, depending on a per-account setting. The two modes produce visibly different journals. See [Credit notes](/revenue-recognition/credit-notes) for the trade-off and worked examples.

**Credit grants**

Prepaid credit grants reduce recognized revenue as they're consumed, so revenue isn't double-counted when an invoice is settled by a grant balance. See [Credit grants](/revenue-recognition/credit-grants).

## Frequently asked questions

<AccordionGroup>
  <Accordion title="Which recognition method should I use for each contract type?">
    * **Straight-line**: subscriptions and fixed-fee services delivered evenly over time.
    * **Usage-based**: API usage, data processing, consumption billing.
    * **Point-in-time**: setup fees, implementation services, one-off deliverables.
    * **Milestone**: project work with specific deliverables tied to acceptance.
  </Accordion>

  <Accordion title="How are product-level discounts handled in journals?">
    Product-level discounts are netted against the product's price within the same journal entry. A \$1,200 subscription with a \$120 discount generates one journal for the net \$1,080.
  </Accordion>

  <Accordion title="How are invoice-level discounts allocated across line items?">
    Invoice-level discounts are allocated across line items in proportion to each line's list price. Each line then recognizes its net amount on its own schedule.
  </Accordion>

  <Accordion title="Can I lock a closed accounting period?">
    Yes. Account period locking prevents new journals from posting into a closed month. Use each invoice's accounting date as its lock floor, or set a single custom lock date for the whole account. Invoices and credit notes can still be issued for locked periods; they post their revenue against the next open period. See [Settings](/revenue-recognition/settings#account-period-locking).
  </Accordion>

  <Accordion title="How do credit grants affect recognized revenue?">
    A credit grant represents revenue that has already been recognized at the point the grant was booked. When the grant is consumed against a subsequent invoice, the recognized revenue for that invoice is reduced by the consumed amount so revenue is not recognized twice. See [Credit grants](/revenue-recognition/credit-grants).
  </Accordion>
</AccordionGroup>