Deferred revenue, also known as unearned revenue, refers to advance payments a company receives for products or services that are to be delivered or performed in the future.

The company that receives the prepayment records the amount as Deferred revenue on their balance sheet as a liability. Deferred revenue is a liability because it refers to revenue that has not been earned and represents products or services that are owed to a customer. As the product or service is delivered over time, it is recognized as revenue on the income statement.

Deferred Revenue Usecase

The internet and broadcasting services providers offers subscription plans on quaterly or yearly basis. They take complete payment in advance from the customer for couple of months, but book income on monthly basis in their books of accounts. Following is how they should configure Deferred Revenue accounting in ERPNext to automate the process.


In the Item master created for the subscription plan, under Deferred Revenue section, check field Enable Deferred Revenue. In this section, you can also select a Deferred Revenue account for this particular item and no. of months.

Item - Deferred Revenue

Sales Invoice

On creation of Sales Invoice for the Deferred Revenue Item, instead of posting in the Income Account, Deferred Revenue account is Credited by the sale amount.

Item - Deferred Revenue

Journal Entry

Based on the From Date and To Date set in the Sales Invoice Item table, Journal Entries are created automatically at the end of each month. It debits the value from Deferred Revenue account and credits Income Account selected for an Item in the Sales Invoice. Following is the example of Income for the deferred Revenue Item is booked via multiple Journal Entries.

Item - Deferred Revenue

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All types of accounting entries other than Sales Invoice and Purchase Invoice are made using the Journal Entry. A Journal Entry is a standard accounting transaction that affects multiple Accounts and the sum of debits is equal to the sum of credits.

To create a Journal Entry go to:

Accounts > Company and Accounts > Journal Entry > New

Journal Entry

In a Journal Entry, you must select.

  • Type of Voucher from the drop down.
  • Add rows for the individual accounting entries. In each row, you must specify:
    • The Account that will be affected
    • The amount to Debit or Credit
    • The Cost Center (if it is an Income or Expense)
    • Against Voucher: Link it to a voucher or invoice if it affects the “outstanding” amount of that invoice.
    • Is Advance: Select “Yes” if you want to make it selectable in an Invoice. Other information in case it is a Bank Payment or a bill.


The “Difference” field is the difference between the Debit and Credit amounts. This should be zero if the Journal Entry is to be “Submitted”. If this number is not zero, you can click on “Make Difference Entry” to add a new row with the amount required to make the total as zero.

Common Entries

A look at some of the common accounting entries that can be done via Journal Voucher.

Expenses (non accruing)

Many times it may not be necessary to accrue an expense, but it can be directly booked against an expense Account on payment. For example a travel allowance or a telephone bill. You can directly debit Telephone Expense (instead of your telephone company) and credit your Bank on payment.

  • Debit: Expense Account (like Telephone expense)
  • Credit: Bank or Cash Account

Bad Debts or Write Offs

If you are writing off an Invoice as a bad debt, you can create a Journal Voucher similar to a Payment, except instead of debiting your Bank, you can debit an Expense Account called Bad Debts.

  • Debit: Bad Debts Written Off
  • Credit: Customer

Note: There may be regulations in your country before you can write off bad debts.


Depreciation is when you write off certain value of your assets as an expense. For example if you have a computer that you will use for say 5 years, you can distribute its expense over the period and pass a Journal Entry at the end of each year reducing its value by a certain percentage.

  • Debit: Depreciation (Expense)
  • Credit: Asset (the Account under which you had booked the asset to be depreciated)

Note: There may be regulations in your country that define by how much amount you can depreciate a class of Assets.

Credit Note

“Credit Note” is made for a Customer against a Sales Invoice when the company needs to adjust a payment for returned goods. When a Credit Note is made, the seller can either make a payment to the customer or adjust the amount in another invoice.

  • Debit: Sales Return Account
  • Credit: Customer Account

Debit Note

“Debit Note” is made for a Supplier against a Purchase Invoice or accepted as a credit note from supplier when a company returns goods. When a Debit Note is made, the company can either receive a payment from the supplier or adjust the amount in another invoice.

  • Debit: Supplier Account
  • Credit: Purchase Return Account

Excise Entry

When a Company buys good from a Supplier, company pays excise duty on these goods to Supplier. And when a company sells these goods to Customers, it receives excise duty. Company will deduct payable excise duty and deposit balance in Govt. account.

  • When a Company buys goods with Excise duty:
    • Debit: Purchase Account
    • Debit: Excise Duty Account
    • Credit: Supplier Account
  • When a Company sells goods with Excise duty:
    • Debit: Customer Account
    • Credit: Sales Account
    • Credit: Excise Duty Account

Note: Applicable in India, might not be applicable for your country. Please check your country regulations.

Payment can be made against following transactions.

  1. Sales Invoice.
  2. Purchase Invoice.
  3. Sales Order (Advance Payment)
  4. Purchase Order (Advance Payment)

In ERPNext, there is two options through which user can capture the payment

  1. Payment Entry(Default).
  2. Journal Entry.

Payment Entry

Step 1: Make Payment

On submitting a document against which Payment Entry can be made, you will find Make Payment button.

Making Payment

Step 2: Payment Entry

Making Payment


Journal Entry

To make payment using journal entry, check below steps

Step 1: Activate Payment via Journal Entry

Goto Accounts Settings > checked Make Payment via Journal Entry

Making Payment

Step 2: Make Payment

On submitting a document against which Journal Entry can be made, you will find Make Payment button.

Making Payment

Step 3: Journal Entry

Save and submit the journal entry to record the payament against the invoice Making Payment


Along with creating Purchase Invoices or Sales Invoices for a single company, you can create inter-linked invoices for multiple companies.

Such as, you can create a Purchase Invoice for a company say ‘Company ABC’, and create a Sales Invoice against this Purchase Invoice for a company say ‘Company XYZ’ and link them together.

To create Inter Company Invoices as mentioned in the above process, you need to follow the below steps:

  • Go to the Customer list, select the customer which you would want to choose for the inter-linked invoices, enable the checkbox, Is Internal Customer as shown below:

    Internal Customer

  • Along with that, add the company which the Customer represents, i.e. the company for which the Sales Invoice will be created.
  • Next, fill up the child table Allowed To Transact With as shown in the image and add the company against which you will be creating a Purchase Invoice, which will be linked with the Sales Invoice created using this Customer.
  • Easy peasy, right? Now, you need to follow the similar procedure for setting up a Supplier for inter-linked invoices. And, in the Represents Company field, add the company which you added in the child table Allowed To Transact With for the Customer.
  • And, in the child table Allowed To Transact With for the Supplier, add the company which the Customer represents or against which you are going to make an inter-linked Purchase Invoice. You can refer the below image to avoid any confusion.

    Internal Supplier

    • Now, create a new Sales Invoice, fill up the fields, and remember to select the Customer who is an internal customer and company which the Customer represents.
    • Submit the Invoice.

    Inter company invoice

    • Under the Make button dropdown, you will find a link Inter Company Invoice, on clicking the link, you will be routed to a new Purchase Invoice form page.
    • Here, the supplier and company will be auto-fetched depending on the company you selected in the Sales Invoice. Remember: There can only be a single Internal Supplier or Customer per company.
    • Submit the invoice, done! Now, both the invoices are inter-linked. Also, on cancelling any of the invoices, the link will break as well.

You can follow the same process to create a Purchase Invoice and then an inter-linked Sales Invoice from the submitted Purchase Invoice.

A debit note is a document sent by a buyer to a seller, or in other words, a purchaser to a vendor while returning goods received on credit. This notifies that a debit has been made to their accounts.

A debit note is issued for the value of the goods returned. In some cases, sellers are seen sending debit notes which should be treated as just another invoice.

How to make debit note in ERPNext

The user can make a debit note against the purchase invoice or they can directly make debit note from the purchase invoice without reference Goto module Accounts > Purchase Invoice > New > Manually enabled Is Return checkbox

Sales Invoice

Note: For debit note set the negative quantity while adding the item


Debit note with payment entry in ERPNext

Sales Invoice

Purchase Invoice is the exact opposite of your Sales Invoice. It is the bill that your Supplier sends you for products or services delivered. Here you accrue expenses to your Supplier. Making a Purchase Invoice is very similar to making a Purchase Order.

To make a new Purchase Invoice:

type “new purchase invoice” into the search bar then select “New Purchase Invoice” from the drop down

or click on “Make Purchase Invoice” in Purchase Order or Purchase Receipt.

You can also create a Purchase Invoice from:

Accounts > Billing > Purchase Invoice > New Purchase Invoice

Purchase Invoice

The concept of “Posting Date” is again same as Sales Invoice. “Bill No” and “Bill Date” helps to track the bill number as set by your Supplier for reference.

Is Paid option

The Is Paid checkbox should be checked if there is a part or full payment on the invoice at posting date.

Update Stock

The Update Stock checkbox should be checked if you want ERPNext to automatically update your inventory. Consequently, there will be no need for a Delivery Note.

Accounting Impact

Like in Sales Invoice, you have to enter an Expense or an Asset account for each row in your Items table. This helps to indicate if the Item is an Asset or an Expense. You must also enter a Cost Center. These can also be set in the Item master.

The Purchase Invoice will affect your accounts as follows:

Accounting entries (GL Entry) for a typical double entry “purchase”:


  • Expense or Asset (net totals, excluding taxes)
  • Taxes (/assets if VAT-type or expense again).


  • Supplier
Accounting Treatment When Is Paid is checked

If Is Paid is checked, ERPNext will also make the following accounting entries:


  • Supplier

Credits: * Bank/Cash Account

To see entries in your Purchase Invoice after you “Submit”, click on “View Ledger”.

Is purchase an “Expense” or an “Asset”?

If the Item is consumed immediately on purchase, or if it is a service, then the purchase becomes an “Expense”. For example, a telephone bill or travel bill is an “Expense” – it is already consumed.

For inventory Items, that have a value, these purchases are not yet “Expense”, because they still have a value while they remain in your stock. They are “Assets”. If they are raw-materials (used in a process), they will become “Expense” the moment they are consumed in the process. If they are to be sold to a Customer, they become “Expense” when you ship them to the Customer.

Deducting Taxes at Source

In many countries, the law may require you to deduct taxes, while paying your suppliers. These taxes could be based on a standard rate. Under these type of schemes, typically if a Supplier crosses a certain threshold of payment, and if the type of product is taxable, you may have to deduct some tax (which you pay back to your government, on your Supplier’s behalf).

To do this, you will have to make a new Tax Account under “Tax Liabilities” or similar and credit this Account by the percent you are bound to deduct for every transaction.

For more help, please contact your Accountant!

Hold Payments For A Purchase Invoice

There are two ways to put a purchase invoice on hold: – Date Span Hold – Explicit Hold

Explicit Hold

Explicit hold holds the purchase invoice indefinitely. To do it, in the “Hold Invoice” section of the purchase invoice form, simply check the “Hold Invoice” checkbox. In the “Reason For Putting On Hold” text field, type a comment explaining why the invoice is to be put on hold.

If you need to hold a submitted invoice, click the “Make” drop down button and click “Block Invoice”. Also add a comment explaining why the invoice is to be put on hold in the dialog that pops up and click “Save”.

Date Span Hold

Date span hold holds the purchase invoice until a specified date. To do it, in the “Hold Invoice” section of the purchase invoice form, check the “Hold Invoice” checkbox. Next, input the release date in the dialog that pops up and click “Save”. The release date is the date that the hold on the document expires.

After the invoice has been saved, you can change the release date by clicking on the “Hold Invoice” drop down button and then “Change Release Date”. This action will cause a dialog to appear.

Purchase Invoice on hold

Select the new release date and click “Save”. You should also enter a comment in the “Reason For Putting On Hold” field.

Take note of the following: – All purchases that have been placed on hold will not included in a Payment Entry’s references table – The release date cannot be in the past. – You can only block or unblock a purchase invoice if it is unpaid. – You can only change the release date if the invoice is unpaid.

A credit note is a document sent by a seller to the customer, notifying that a credit has been made to their account against the goods returned by the buyer.

A credit note is issued for the value of goods returned by the customer, it may be less than or equal to total amount of the order.

How to make credit note in ERPNext

The user can make a credit note against the sales invoice or they can directly make credit note from the sales invoice without reference Goto module Accounts > Sales Invoice > New > Manually enabled Is Return checkbox

Sales InvoiceNote: For credit note set the negative quantity while adding the item


Customer Mr. Sagar Malhotra has purchased Nokia Lumia worth Rs 42,400 and at the time of delivery customer were found that the piece has been damaged. Now Sagar has returned the product and he got his money back. Credit note with payment entry in ERPNext for above example is as below

Sales Invoice

For retail operations, the delivery of goods, accrual of sale and payment all happens in one event, that is usually called the “Point of Sale” (POS).

Offline POS

In the retails business, invoicing needs to done very quickly, hence should less dependency. In the ERPNext, you can create POS Invoices, even when not connected to the internet.

POS Invoices created in the offline mode will be saved locally in the browser. If internet connection is lost which creating POS Invoice, you will still be able can proceed forward. Once internet connection is available again, offline invoices will be synced, and pushed onto your ERPNext account. To learn more on how POS Invoices can be created when offline, check here.

POS Profile

In ERPNext all Sales and Purchase transactions, like Sales Invoice, Quotation, Sales Order, Purchase Order etc. can be edited via the POS. There two steps to Setup POS:

  1. Enable POS View via (Setup > Customize > Feature Setup)
  2. Create a POS Profile record

Different sections of the POS

  • Update Stock: If this is checked, Stock Ledger Entries will be made when you “Submit” this Sales Invoice thereby eliminating the need for a separate Delivery Note.
  • In your Items table, update inventory information like Warehouse (saved as default), Serial Number, or Batch Number if applicable.
  • Update Payment Details like your Bank / Cash Account, Paid amount etc.
  • If you are writing off certain amount. For example when you receive extra cash as a result of not having exact denomination of change, check on ‘Write off Outstanding Amount’ and set the Account.


In POS, user can select the existing customer during making an order or create the new customer. This features works in the offline mode also. User can also add the customer details like contact number, address details etc on the form. The customer which has been created from the POS will be synced when the internet connection is active.

POS Customer

Adding an Item

At the billing counter, the retailer needs to select Items which the consumer buys. In the POS interface you can select an Item by two methods. One, is by clicking on the Item image and the other, is through the Barcode / Serial No.

Select Item – To select a product click on the Item image and add it into the cart. A cart is an area that prepares a customer for checkout by allowing to edit product information, adjust taxes and add discounts.

Barcode / Serial No – A Barcode / Serial No is an optical machine-readable representation of data relating to the object to which it is attached. Enter Barcode / Serial No in the box as shown in the image below and pause for a second, the item will be automatically added to the cart.

POS Item

Tip: To change the quantity of an Item, enter your desired quantity in the quantity box. These are mostly used if the same Item is purchased in bulk.

If your product list is very long use the Search field, type the product name in Search box.

Removing an Item from the Cart

  1. Select row in the cart and clik on delete button in the numeric keypad

POS Item

  1. Set Qty as zero to remove Item from the POS invoice. There are two ways to remove an Item.
    • If Item’s Qty is 1, click on a minus sign to make it zero.
    • Manually enter 0(zero) quantity.

Make Payment

After all the Items and their quantities are added into the cart, you are ready to make the Payment. Payment process is divided into 3 steps –

  1. Click on “Make Payment” to get the Payment window.
  2. Select your “Mode of Payment”.
  3. Click on “Pay” button to Save the document.

POS Payment

Submit the document to finalise the record. After the document is submitted, you can either print or email it directly to the customer.

Write off Amount

Outstanding amount can be write off from the POS, user has to enter the amount under write off field on the payment screen.

POS Payment

System books the write off amount into the ledger which has selected on the POS Profile.

Change Amount

POS calculate the extra amount paid by the customer, which user can return from the cash account. User has to set the account for the change amount on the POS profile.

POS Payment

Offline Records

All the records from the POS stores into the browser’s local storegae and sync submitted records after every minute of the interval if system is connected to internet. User can view the offline records by clicking on Menu > View Offline Records

POS Payment

Accounting entries (GL Entry) for a Point of Sale:


  • Customer (grand total)
  • Bank / Cash (payment)


  • Income (net total, minus taxes for each Item)
  • Taxes (liabilities to be paid to the government)
  • Customer (payment)
  • Write Off (optional)
  • Account for Change Amount (optional)

To see entries after “Submit”, click on “View Ledger”.


User can send email from the POS, after submission of an order, user has to click on menu > email POS PaymentAfter sync of an order, email sent to the customer with the print of the bill in the attachment

POS Closing Voucher

At the end of its shift, the cashier can close his/her PoS by creating a POS Closing Voucher.

Click on the menu and select “Close the POS”

Select the period, your POS Profile and your user to retrieve all sales registered.

POS Payment

Enter the collected amount for each mode of payment. If you notice any difference between the theoretical amount and the collected amount, create a difference posting.

The one-screen point-of-sale software, for the one-stop-shop retail business. It does everything your store needs, right from POS billing, to purchasing, to customer relationship management.

POS Invoice

Offline POS

In the retails business, invoicing needs to done very quickly, hence should less dependency. In the ERPNext, you can create POS Invoices, even when not connected to the internet.

POS Invoice

POS Demo

Here is the quick demonstration on the Point of Sale feature of ERPNext.

A Sales Invoice is a bill that you send to your customers, against which the customer processes the payment. Sales Invoice is an accounting transaction. On submission of Sales Invoice, the system updates the receivable and books income against a Customer Account.

You can create a Sales Invoice directly from

Accounts > Billing > Sales Invoice > New Sales Invoice

or you can Make a new Sales Invoice after you submit the Delivery Note.

Sales Invoice

Accounting Impact

All Sales must be booked against an “Income Account”. This refers to an Account in the “Income” section of your Chart of Accounts. It is a good practice to classify your income by type (like product income, service income etc). The Income Account must be set for each row of the Items table.

Tip: To set default Income Accounts for Items, you can set it in the Item or Item Group.

The other account that is affected is the Account of the Customer. That is automatically set from “Debit To” in the heading section.

You must also mention the Cost Centers in which your Income must be booked. Remember that your Cost Centers tell you the profitability of the different lines of business or product. You can also set a default Cost Center in the Item master.

Accounting entries (GL Entry) for a typical double entry “Sale”:

When booking a sale (accrual):

Debit: Customer (grand total) Credit: Income (net total, minus taxes for each Item) Credit:Taxes (liabilities to be paid to the government)

To see entries in your Sales Invoice after you “Submit”, click on “View Ledger”.


Posting Date: The date on which the Sales Invoice will affect your books of accounts i.e. your General Ledger. This will affect all your balances in that accounting period.

Due Date: The date on which the payment is due (if you have sold on credit). This can be automatically set from the Customer master.

Recurring Invoices

If you have a contract with a Customer where you bill the Customer on a monthly, quarterly, half-yearly or annual basis, you can check the “Recurring Invoice” box. Here you can fill in the details of how frequently you want to bill this Invoice and the period for which the contract is valid.

ERPNext will automatically create new Invoices and mail it to the Email Addresses you set.

Automatically Fetching Item Batch Numbers

If you are selling an item from a Batch, ERPNext will automatically fetch a batch number for you if “Update Stock” is checked. The batch number will be fetched on a First Expiring First Out (FEFO) basis. This is a variant of First In First Out (FIFO) that gives highest priority to the soonest to expire Items.

POS Invoice

Note that if the first batch in the queue cannot satisfy the order on the invoice, the next batch in the queue that can satisfy the order will be selected. If there is no batch that can satisfy the order, ERPNext will cancel its attempt to automatically fetch a suitable batch number.

POS Invoices

Consider a scenario where retail transaction is carried out. For e.g: A retail shop. If you check the Is POS checkbox, then all your POS Profile data is fetched into the Sales Invoice and you can easily make payments. Also, if you check the Update Stock the stock will also update automatically, without the need of a Delivery Note.

POS Invoice

Billing Timesheet with Project

If you want to bill employees working on Projects on hourly basis (contract based), they can fill out Timesheets which consists their billing rate. When you make a new Sales Invoice, select the Project for which the billing is to be made, and the corresponding Timesheet entries for that Project will be fetched.

POS Invoice

“Pro Forma” Invoice

If you want to give an Invoice to a Customer to make a payment before you deliver, i.e. you operate on a payment first basis, you should create a Quotation and title it as a “Pro-forma Invoice” (or something similar) using the Print Heading feature.

“Pro Forma” means for formality. Why do this? Because if you book a Sales Invoice it will show up in your “Accounts Receivable” and “Income”. This is not ideal as your Customer may or may not decide to pay up. But since your Customer wants an “Invoice”, you could give the Customer a Quotation (in ERPNext) titled as “Pro Forma Invoice”. This way everyone is happy.

This is a fairly common practice. We follow this at Frappe too.