I am not an accountant, but I imagine it has to be booked as revenue in an accrual system on a per-period basis. To satisfy double-entry, it would originally be booked as cash and a liability.
Take magazine subscriptions. You pay $240 for an annual subscription to Frisbee Fancier's Magazine at the start of the year. They book this:
Cash at Bank: $240 -
Magazines Owed: - $240
Then they send you the January edition ("Gold Plated Frisbee Showdown!") and do this:
Revenue from Subscription: $20 -
Magazines Owed: - $20
That is, they move $20 from liability to revenue. Cash at bank is unaffected by this transaction.
How Groupon chooses to recognise the timing of revenue will affect their apparent numbers. I would prefer a conservative magazine-style model as above, but it might be possible for them to book the revenue up front and then use that as their basis of their projections.
I don't know enough about Groupon or accounting to be certain. Seek professional advice before investing etc.
It's not really tap dancing. Accounting aims to give a meaningful account of the life of the business. Dividing up subscriptions into parts and recognising that a pre-payment is also a liability more accurately represents the nature of subscription than merely booking a single payment up front.
In this scenario, income is appearing each time the magazine is sent out, but the cash is in hand all along. The hardest part of understanding accrual accounting is to learn that a sales event is not necessarily a cash event.
I don't mean to diminish accounting as a discipline. I'm sorry if I came across that way. My point was that the cash position doesn't reflect real revenue until the contingency is cleared. At best, you can "gamble" with the money while you have it.
I only did one unit of accounting to see what the fuss was about. Quite enlightening really.
Cash positions are a different beast from revenue -- and indeed that's why Income Statements (aka P&L) and Cashflow Statements are both produced -- to give that two-way perspective on a business, along with the Balance Sheet.
All three are connected and you can, given a sample, derive them from each other. But to understand how a business is behaving you need to study all three.
That being said, accounting is all about devilish details. If Groupon are booking their revenue as being immediate upon the deal, rather than a subscription style cash+liability, then they can make quarterly revenue appear much higher than it might otherwise be seen as in retrospect.
Take magazine subscriptions. You pay $240 for an annual subscription to Frisbee Fancier's Magazine at the start of the year. They book this:
Then they send you the January edition ("Gold Plated Frisbee Showdown!") and do this: That is, they move $20 from liability to revenue. Cash at bank is unaffected by this transaction.How Groupon chooses to recognise the timing of revenue will affect their apparent numbers. I would prefer a conservative magazine-style model as above, but it might be possible for them to book the revenue up front and then use that as their basis of their projections.
I don't know enough about Groupon or accounting to be certain. Seek professional advice before investing etc.