Guide
SaaS platforms
Handle subscriptions, usage-based fees, refunds, and revenue recognition with balanced entries.
What is double-entry?
Double-entry keeps every money movement balanced: for every debit there’s a credit, and totals always match. Instead of one running total, you use multiple accounts (cash, revenue, payables, etc.) to show where money came from and where it went.
Why multiple accounts? They give clarity: cash up or down, revenue earned, liabilities owed, equity changing. Balancing debits and credits means you can trust the ledger—errors show up immediately, and you can prove history to teammates and auditors.
For a deeper dive, see Investopedia: Double-Entry Accounting.
Core accounts to set up
- Cash / Bank (asset)
- Accounts Receivable (asset) — if invoicing/collecting later
- Deferred Revenue (liability) — for unearned subscription revenue
- Subscription Revenue (income)
- Usage/Overage Revenue (income) — if usage-based
- Refunds / Credits (income contra)
- Sales Tax Payable (liability) — if applicable
Examples
Subscription billed monthly (in arrears)
Invoice at month end; revenue recognized when invoiced.
- Debit Accounts Receivable
- Credit Subscription Revenue
On payment: Debit Cash, Credit Accounts Receivable.
Subscription paid upfront
Cash collected before service period; recognize over time.
- Debit Cash
- Credit Deferred Revenue (liability)
Each period: Debit Deferred Revenue, Credit Subscription Revenue.
Usage/overage fees
Record variable charges.
- Debit Accounts Receivable (or Cash)
- Credit Usage/Overage Revenue
Refund / credit memo
Reduce revenue and return cash or reduce receivable.
- Debit Refunds (income contra) or Subscription Revenue
- Credit Cash (if refunding) or Accounts Receivable (if credit memo)
Sales tax collected
You collect tax on behalf of a jurisdiction.
- Debit Accounts Receivable (or Cash)
- Credit Sales Tax Payable (liability)
When remitted: Debit Sales Tax Payable, Credit Cash.
Annual contract upfront
Collect once; recognize monthly.
- Debit Cash
- Credit Deferred Revenue
Each month: Debit Deferred Revenue, Credit Subscription Revenue.
Checklist
- Use Deferred Revenue for upfront payments; recognize as you deliver service.
- Keep usage separate from flat subscription revenue for clearer reporting.
- Refunds/credits reduce revenue and either cash or receivables.
- Sales tax stays a liability until remitted.