Who it's for: anyone posting or reviewing journals in a SaaS or tech finance team, especially if you're new to SaaS or need a quick double-check.
What you'll get: the debits and credits for the 20 most common SaaS transactions, from annual billing to share options, all in one place with MonthEndClub Co Ltd numbers, plus AI prompts for checking journals.
Reading time: about 10 minutes end to end, or 30 seconds to find the one you need.
Why a cheat sheet helps
Most month-end journals are the same twenty or so entries, repeated. Getting them right every time is less about genius and more about having the pattern in front of you. This page is that pattern: what to debit, what to credit and the one thing that usually goes wrong.
All examples use MonthEndClub Co Ltd, a fictional UK SaaS company, with UK VAT at the standard rate of 20% where VAT applies. Every journal balances; check yours does too.
Key terms
- Debit (Dr) and credit (Cr): the two sides of every entry. Debits increase assets and expenses; credits increase liabilities, equity and income.
- Deferred revenue: billed but not yet earned. A liability.
- Accrued income: earned but not yet billed. An asset.
- Accrual: a cost incurred but not yet invoiced. A liability.
- Prepayment: a cost paid for a future period. An asset.
- Clearing account: a temporary account that holds amounts until they're matched, such as a payment processor balance.
A quick memory aid: DEAD CLIC. Debits increase Expenses, Assets and Drawings; Credits increase Liabilities, Income and Capital.
Revenue and billing
1. Annual subscription invoiced upfront
Invoice £24,000 + VAT for 12 months' service.
| Account | Dr | Cr |
|---|---|---|
| Trade debtors | £28,800 | |
| Deferred revenue | £24,000 | |
| VAT output tax | £4,800 |
Watch out: the full amount goes to deferred revenue, not revenue.
2. Monthly revenue release
One month of the subscription above: £24,000 ÷ 12 = £2,000.
| Account | Dr | Cr |
|---|---|---|
| Deferred revenue | £2,000 | |
| Subscription revenue | £2,000 |
3. Usage delivered but not yet billed (accrued income)
October overage of £3,500, invoiced in November.
| Account | Dr | Cr |
|---|---|---|
| Accrued income | £3,500 | |
| Usage revenue | £3,500 |
Watch out: reverse it in November when the invoice is raised, or the revenue is counted twice.
4. Credit note for a cancelled annual contract
A customer cancels with 6 months left, under a contract that allows a refund. Credit note £12,000 + VAT.
| Account | Dr | Cr |
|---|---|---|
| Deferred revenue | £12,000 | |
| VAT output tax | £2,400 | |
| Trade debtors | £14,400 |
Watch out: only the unearned part comes off deferred revenue. The six months already recognised stay in revenue.
5. Customer payment received
| Account | Dr | Cr |
|---|---|---|
| Bank | £28,800 | |
| Trade debtors | £28,800 |
6. Stripe payout: card sales, fees and a refund
Customers pay £10,000 of invoices by card (VAT already accounted for on the invoices). One customer, already given a credit note, is refunded £400. Stripe fees are £250. Payout to bank: £10,000 − £400 − £250 = £9,350.
| Account | Dr | Cr |
|---|---|---|
| Stripe clearing (card payments received) | £10,000 | |
| Trade debtors (invoices paid) | £10,000 | |
| Trade debtors (refund paid against the credit note) | £400 | |
| Stripe clearing (refund) | £400 | |
| Payment processing fees (P&L) | £250 | |
| Stripe clearing (fees) | £250 | |
| Bank (payout) | £9,350 | |
| Stripe clearing (payout) | £9,350 | |
| Total | £20,000 | £20,000 |
Watch out: never post the payout as one net figure to revenue. Stripe clearing ends at zero.
7. Bad debt provision
Increase the provision by £5,000 for overdue debtors.
| Account | Dr | Cr |
|---|---|---|
| Bad debt expense (P&L) | £5,000 | |
| Bad debt provision (contra to debtors) | £5,000 |
AI shortcut: give an approved AI tool a month's revenue journals and your deferred revenue schedule, and ask it to list any invoice posted straight to revenue where the service period runs beyond the month. A person checks each one against the contract.
Costs, accruals and prepayments
8. Supplier invoice, UK supplier
Marketing agency, £5,000 + VAT.
| Account | Dr | Cr |
|---|---|---|
| Marketing costs (P&L) | £5,000 | |
| VAT input tax | £1,000 | |
| Trade creditors | £6,000 |
9. Cost accrual
October cloud hosting not yet invoiced, £18,500.
| Account | Dr | Cr |
|---|---|---|
| Hosting costs (cost of sales) | £18,500 | |
| Accruals | £18,500 |
Watch out: reverse it next month. Set it to auto-reverse if your system allows.
10. Prepayment: annual software paid upfront
Annual tool £12,000 + VAT, then release £1,000 a month.
| Account | Dr | Cr |
|---|---|---|
| Prepayments | £12,000 | |
| VAT input tax | £2,400 | |
| Trade creditors | £14,400 |
| Account (monthly release) | Dr | Cr |
|---|---|---|
| Software subscriptions (P&L) | £1,000 | |
| Prepayments | £1,000 |
11. Overseas service with reverse charge VAT
US supplier, £8,000, no VAT on the invoice. A UK VAT-registered business typically accounts for VAT itself under the reverse charge.
| Account | Dr | Cr |
|---|---|---|
| Software subscriptions (P&L) | £8,000 | |
| VAT input tax (reverse charge) | £1,600 | |
| VAT output tax (reverse charge) | £1,600 | |
| Trade creditors | £8,000 |
12. Capitalised sales commission and its amortisation
Commission £3,600 on a new 3-year contract, capitalised and spread over 36 months (£100 a month), where the company's policy is to capitalise.
| Account | Dr | Cr |
|---|---|---|
| Capitalised contract costs (asset) | £3,600 | |
| Commission accrual or payroll | £3,600 |
| Account (monthly) | Dr | Cr |
|---|---|---|
| Sales commission expense (P&L) | £100 | |
| Capitalised contract costs | £100 |
13. Depreciation
Laptops costing £21,600, written off over 3 years: £600 a month.
| Account | Dr | Cr |
|---|---|---|
| Depreciation (P&L) | £600 | |
| Accumulated depreciation | £600 |
Payroll and people
14. Monthly payroll
Ten employees on £5,000 a month, 2026 to 2027 rates, pensions under a net pay arrangement. Gross pay £50,000, employer NI £6,875, employer pension £2,500. Deductions: PAYE £8,527, employee NI £2,675, employee pension £2,500. Net pay £50,000 − £8,527 − £2,675 − £2,500 = £36,298.
| Account | Dr | Cr |
|---|---|---|
| Salaries (P&L) | £50,000 | |
| Employer NI (P&L) | £6,875 | |
| Employer pension (P&L) | £2,500 | |
| Net wages control | £36,298 | |
| PAYE/NI control (£8,527 + £2,675 + £6,875) | £18,077 | |
| Pension control (£2,500 + £2,500) | £5,000 |
Check: debits £59,375; credits £36,298 + £18,077 + £5,000 = £59,375.
15. Bonus accrual
Monthly bonus accrual £4,000 plus employer NI at 15%, £600.
| Account | Dr | Cr |
|---|---|---|
| Bonus expense (P&L) | £4,000 | |
| Employer NI on bonus (P&L) | £600 | |
| Accruals: bonus | £4,600 |
16. Share-based payment charge
| Account | Dr | Cr |
|---|---|---|
| Share-based payment expense (P&L) | £360 | |
| Share-based payment reserve (equity) | £360 |
Cash, tax and balance sheet
17. VAT return payment
| Account | Dr | Cr |
|---|---|---|
| VAT control | £41,200 | |
| Bank | £41,200 |
18. FX revaluation of a US dollar debtor
Invoice for $10,000 booked at $1.25 = £8,000. At month-end the rate is $1.28: $10,000 ÷ 1.28 = £7,812.50. Loss £187.50.
| Account | Dr | Cr |
|---|---|---|
| FX losses (P&L) | £187.50 | |
| Trade debtors (USD) | £187.50 |
19. Intercompany recharge
UK parent recharges £15,000 of shared costs to its US subsidiary. In the UK books:
| Account | Dr | Cr |
|---|---|---|
| Intercompany receivable: US subsidiary | £15,000 | |
| Recharge income (or cost recovery) | £15,000 |
Watch out: the US subsidiary books the mirror entry in the same month, or the balances won't agree.
20. Clearing a suspense item
£2,300 receipt sat in suspense; it's identified as a customer payment.
| Account | Dr | Cr |
|---|---|---|
| Suspense | £2,300 | |
| Trade debtors | £2,300 |
If you report under US GAAP (ASC 606)
The mechanics above are the same under US GAAP. Labels can differ: deferred revenue is often called a "contract liability" and accrued income a "contract asset" or "unbilled receivable". Contract cost capitalisation (entry 12) follows ASC 340-40 and share options (entry 16) follow ASC 718, with some policy choices that differ from IFRS and FRS 102.
Common mistakes and audit watch-outs
- Debit and credit the wrong way round. If an accrual makes the P&L smaller, something's backwards.
- Grossing VAT into the cost. For a fully VAT-registered business, recoverable VAT goes to input tax, not the expense line.
- Accruals and accrued income that never reverse. Double-counting, every time.
- Net payouts. Payment processor payouts posted net hide fees and refunds.
- Journals without support. Every manual journal has a reason, a calculation and an approver.
- Copying AI-suggested journals unchecked. AI can pick the wrong account or flip a sign. Check every line against your chart of accounts.
AI prompts to try
Use these only in AI tools your company has approved for financial data. AI drafts and checks; a person approves every journal.
1. Draft a journal. "Using this chart of accounts, draft the double entry for this transaction: [description, amounts, dates, VAT]. Show it as a Dr/Cr table and confirm it balances." Give it: your chart of accounts and the source document. Check: account codes, VAT and that the totals agree.
2. Review a batch. "Here are this month's manual journals. List any that don't balance, use rarely used accounts, have round amounts, lack a description, or were prepared and approved by the same person." Give it: the journal export with preparer and approver. Check: each flag against the support.
3. Explain a journal. "Explain in plain English what this journal does to the P&L and balance sheet." Give it: one journal. Check: the explanation matches your intent; it's a good test before approval.
4. Find missing reversals. "Compare last month's accruals and accrued income journals with this month's journals and list any that haven't been reversed." Give it: both months' journal listings. Check: each item in the ledger.
Rates, thresholds and rules in this guide
Figures were checked against the pages below in October 2026. They change regularly (often each April or at Budget time), and we can't guarantee they're still current or right for your situation. Always check the official page before relying on them.
- VAT rates (GOV.UK): the UK standard VAT rate of 20%
- Place of supply of services (VAT Notice 741A) (HMRC, GOV.UK): the reverse charge on services bought from overseas suppliers
- Rates and thresholds for employers 2026 to 2027 (HMRC, GOV.UK): employer and employee NI rates and thresholds, and income tax bands used in the payroll and bonus examples
Key takeaways
- Most SaaS month-end journals are the same twenty patterns.
- Billing goes to deferred revenue; revenue is released as the service is delivered.
- Accruals and accrued income reverse next month.
- Payment processor payouts are grossed up: sales, refunds and fees separately.
- Every journal balances, has support and has an approver.
- AI can draft and check journals; a person approves them.
FAQs
Why does deferred revenue sit on the credit side?
It's a liability: the company owes the customer service it hasn't delivered yet. Liabilities increase with credits.
Should accruals include VAT?
Usually not. Accruals are typically booked net of VAT, because the VAT is claimed when the real invoice arrives.
Can AI post journals directly into the ledger?
Some tools can, but a common approach is for AI to prepare the journal and a person to review and approve it before posting, with the same approval rules as any other manual journal.
Related guides
- Journal Review and Approval: Simple Controls That Work
- Annual Upfront Billing: The Journals, Month by Month
- Stripe Payout Reconciliation: Fees, Refunds, Disputes and FX
- SaaS Finance Glossary: 60 Terms in Plain English
More in Reconciliations and Controls guides.
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This guide is general information about common practice. It isn't tailored to any business, and standards, tax rules and figures change. Check your own circumstances, the latest rules and, where needed, a qualified professional before acting.
Last reviewed: October 2026.