Overview

When making purchases, customers may apply store credits they received before to reduce the payable amount of the invoice. The invoice amount may be fully or partially covered.

Journal entries can be created on Leapfin Platform for all credit applications, regardless of whether the credit is applied to purchase a single purchase or an ongoing subscription.

Configuration

Required parameters

Fields	Description
`applied_date`	calendar date of when the credit is applied as payment to an invoice
`applied_amount`	amount of credit applied as payment to an invoice

Required accounts

Accounts	Description
`revenue_account`	asset account representing revenue. e.g. "Revenue"
`credit_liability_account`	liability account representing debt owed to customers. e.g. "Credit Liability", "Unearned Revenue"
`cash_account`	cash or cash equivalent account, e.g. "Cash", "Account Receivable"

Optional parameters & accounts

Fields	Description
`service_start_date`	calendar date of when the subscription period begins. The date is include in the subscription period.
`service_end_date`	calendar date of when the subscription period ends. The date is include in the subscription period.
`deferred_revenue_account`	liability account represent the deferred revenue. e.g. "Deferred Revenue".

Walkthrough 1: Single Purchase

Customer John purchased a table on Amazon on Jan 1st for $100. When making payment, he decided to apply $30 Amazon credit to the invoice and paid the remaining $70 with credit card.

Event 1: item is purchased

When the table is purchased on Jan 1st (applied_date), the following journal entry is created. (Assuming the payment is made immediately upon purchase)

Date	Account	Debit Amount	Credit Amount
01/01/2022	Cash	100
	Revenue		100

Event 2: credit is applied

On the same date, when the $30 Amazon credit (applied_amount) is consumed, the following journal entry is created. (Assuming the payment is made immediately upon purchase)

Date	Account	Debit Amount	Credit Amount
01/01/2022	Credit Liability	30
	Cash		30

Walkthrough 2: Subscription

Customer Kerry subscribed Amazon prime for $14.99/month. For the upcoming billing cycle starting Feb 10th (service_start_date), she decided to make payment on Feb 9th (applied_date) and apply $5 Amazon credit (applied_amount).

Event 1: item is purchased

When the subscription is invoiced and paid on Feb 9th (applied_date), the following journal entry is created. (Assuming the payment is made immediately upon purchase)

Date	Account	Debit Amount	Credit Amount
02/09/2022	Cash	14.99
	Deferred Revenue		14.99

Besides, a series of amortization journal entries will be created to recognize revenue on a daily basis. The amortization journal entries cover the subscription cycle from Feb 10th (service_start_date) to Mar 9th (service_end_date).

Date	Account	Debit Amount	Credit Amount
02/10/2022	Deferred Revenue	0.53
	Revenue		0.53
02/11/2022	Deferred Revenue	0.53
	Revenue		0.53
...
03/09/2022	Deferred Revenue	0.53
	Revenue		0.53

📘
The daily amount is calculated by $14.99 / (number of days between 02/10/2022 and 03/09/2022) = $0.53
Read here about the rounding treatment for sub-cent amounts.

Event 2: credit is applied

On Feb 9th (applied_date), when Kerry applied the $5 Amazon credit (applied_amount), the following journal entry is created.

Date	Account	Debit Amount	Credit Amount
02/09/2022	Credit Liability	5
	Cash		5