How Revenue Recognition affects time/expense entry and billing?

BQE CORE automates revenue recognition through system-generated journal entries for time and expense entries. These journal entries are created behind the scenes and posted at the end of each day to reflect financial activity based on the Revenue Recognition method selected in the Settings screen. Separate reversal entries are posted at the time of invoicing to adjust for work-in-progress (WIP) and record recognized income.

Revenue Recognition data is handled automatically based on the selected method:

• Billed + WIP
• Billed Only

Depending on the method configured, journal entries are created at the time of time and expense entry and reversed upon invoicing. Let us see how CORE manages these entries in the background with examples for each scenario.

Note: Journal entries created by revenue recognition are visible in the General Journal screen, but cannot be edited (read-only).

Daily Revenue Recognition Journal

Each day, CORE evaluates all time and expense WIP items entered and posts them to a consolidated revenue recognition journal at the end of the day. This ensures that time and expenses entered are reflected on financial statements.

Each journal may contain multiple lines, with one or more rows per time and expense entry. 

Note: Journal entries are only posted when WIP items exist. No empty entries are created.

Recognition Method: Billed + WIP

This method accrues revenue as soon as time and expense are logged and reverses it upon invoicing. Below are a few examples.

Example: Billable Time Entry (Billed + WIP method)

Suppose an employee logs 5 billable hours on a project with a cost rate of $50 and a bill rate of $100, totaling $500. When this entry is saved, CORE posts a revenue recognition journal where:

• The full billable amount of $500 is debited to the Unbilled Labor account.
• The cost of $250 (5 hours × $50) is credited to the Salaries Payable account.
• The same $500 is also credited to the WIP Labor account to reflect work in progress.
• Additionally, $250 is debited to the Billable Work account to balance the labor cost and revenue recognition.

Example: Billable Expense Entry

An employee enters a non-reimbursable billable expense of $130 with a cost of $100 as an example. When this expense is saved:

• $130 is debited to the Unbilled Expense account.
• $100 is credited to an Itemized Expense account or the Default Item Expense account, if none is specified.
• $130 is credited to the WIP Expense account to reflect the expense portion of revenue recognition.
• Separately, $100 is debited from the linked Payment account (such as a check or credit card charge) or defaults to the Write Check account.

Example: Billable Vendor Expense Entry

In this scenario, a billable vendor expense is logged with a cost of $300 and a charge amount of $500. CORE posts a journal where:

• $500 is debited to Unbilled Consultant.
• $300 is credited to the Itemized Expense account or the default Vendor Expense account.
• $500 is credited to the WIP Consultant account to track the revenue from this vendor expense.
• The $300 cost is debited from the Payment account used for the vendor expense.

Reverse Journal on Invoicing

When an invoice is generated, CORE automatically posts a reverse revenue recognition journal entry. This entry clears the WIP and unbilled accounts that were previously affected by the related time and expense entries. This ensures that revenue is only recognized through the invoice and not duplicated.

Note: Reverse journal entries are only created if there are WIP time or expense entries within the invoice date range. If no WIP exists, no reversal is posted.

For example, if an invoice is created for billable time and expenses recorded earlier, CORE posts a reversal journal entry with the following format:

• Date: Same as the invoice date
• Accounting Date: Based on the accounting settings
• Entry Type: Accrual
• Entry Number: RevRec - (next entry number as defined by journal number sequence).

This reversal entry appears in the Show Journal section of the invoice.