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How does Puzzle calculate accrued and deferred revenue?
How does Puzzle calculate accrued and deferred revenue?
Luke Frye avatar
Written by Luke Frye
Updated over a week ago

Founder Edition

Puzzle takes the money you receive for a yearly subscription and spreads it out over the year, counting a little bit each month.

For example, if you buy a $12 yearly subscription starting on October 1, Puzzle thinks of it as making $1 each month. So, it counts $1 for October, $1 for November, and keeps going until it adds up to $12 after a year.

But if you start the same $12 subscription on October 15, Puzzle counts it a little differently. For the first month, it only counts 50 cents, because you're starting in the middle of the month.

So it wouldn't be fair to count the whole $1 for that first October.

And just to keep the math simple, Puzzle pretends that every month has 30 days.

So, for Puzzle, a year is not 365 days but 360 days (that's 30 days times 12 months).

Accountant Edition

A more technical answer (if you’re an accountant)

Puzzle calculates revenue based on the following convention:

  • 30 days per month, which results in 360 days for the year (30 days x 12 months)

Puzzle uses this model to automatically calculate the pro-rated amount of revenue to be recognized in any given period, with a prorated first month.


A customer signs up for a subscription

  • Your customer, David Sacks, signs up for a monthly (30 day) subscription on September 26 for $2.00.

  • The value of this subscription is $2 per month.

What happens in September

  • Revenue needs to be prorated as the subscription was not purchased until September 26.

    • The first month amortization should be $2 * 5 days/30 days = $0.32

What happens in October

  • In the next month, the amortization is the total amount of the subscription ($2) less the amount recognized in September = $1.68.

Tell me more about the amortization

Puzzle’s revenue amortization is cumulative. This means the rounding is handled over the course of the entire amortization period. Some months may not have the exact same amortization amount.


  • Take a $100 contract that needs to be recognized over 12 months.

  • The first month amortization is $100 * 1/12 = $8.33.

  • The second month cumulative amortization is $100 * 2/12 = $16.67. This means the monthly amortization is $16.67 - $8.33 = $8.34, which is $0.01 different from the first month.

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