How a P&L behaves
Recognition date
The day an amount belongs to.
Where it lives in nouz
Applied throughout the P&L.
Every figure on a P&L belongs to exactly one day. Sales and cost of goods belong to the order date, refunds to the refund date, ad spend to the spend date, and prorated fixed costs to each day they cover.
The common mistake is booking a refund back against the original order. It makes last month keep improving while this month gets worse, and it is the fastest way for a team to stop trusting a report.
Once recognition is fixed, a closed day stays closed. That is what makes yesterday's number worth reading.
The refund case is the one worth reading in full, because it is a decision every merchant makes implicitly and almost none makes deliberately: which day a refund belongs to.
Related terms