# How revenue recognition, deferred revenue, and accrued revenue work
To calculate the revenue recognized over a given period (a month, a quarter, a year), as well as the amounts of Unearned Revenue (PCA) and Accrued Income (FAE) at the end of that period, we first separately calculate the individual contributions of each invoice line to these different items before aggregating them.
## 1. Definition of revenue recognition
Revenue recognition follows strict accounting rules and consists of recognizing revenue when it is actually earned, that is, when a service is provided. Unlike MRR, revenue recognition is prorated, which means it is calculated based on the period during which the service was actually provided.
### a) For a one-time invoice line
**Contribution to revenue for the period:**
A one-time invoice amount is recognized as revenue if the issuance date of that invoice falls within the analyzed period.
$$
Recognized revenue = Invoice amount
$$
### b) For a recurring invoice line
**Contribution to revenue for the period:**
$$
Recognized:revenue=Subscription:amount×\frac{Days:of:service:in:the:month}{Total:number:of:days:in:the:month}
$$
## Contribution to FAE and PCA
{% hint style="info" %}
***Note*** : Any one-time invoice does not generate PCA and FAE; only subscription invoices contribute to them.
{% endhint %}
Conditions
PCA
FAE
CONDITIONS
PCA
FAE
Invoice issuance date < End of service period
Invoice line amount excluding tax – cumulative recognized revenue*
0
Invoice issuance date > End of service period
0
Cumulative recognized revenue*
*\*Cumulative recognized revenue = cumulative value of contributions over all periods prior to and including the period considered.*
---
# Agent Instructions: Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.
Perform an HTTP GET request on the current page URL with the `ask` query parameter:
```
GET https://fincome.gitbook.io/help-center/en/understanding-the-numbers/mrr-vs-revenue-recognition/how-revenue-recognition-deferred-revenue-and-accrued-revenue-work.md?ask=
```
The question should be specific, self-contained, and written in natural language.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.
Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.