Recognition date

The recognition date is the single day a P&L amount belongs to: sales and their cost of goods to the order date, refunds to the refund date, ad spend to the spend date, prorated fixed costs to each day they cover. Fixing it is what lets a closed day stay closed.

Every figure on a P&L belongs to exactly one day, and the rules are short: sales and cost of goods belong to the order date, refunds to the refund date, ad spend to the day it was spent, one-off costs to their booking date, and recurring fixed costs to every day they cover in equal slices.

The common mistake is booking a refund back against the original order. A May refund of an April order then edits April: last month keeps improving while this month gets worse, the morning email stops matching the report pulled last week, and the team quietly stops trusting both. Booked to the refund date instead, April is finished the moment it ends.

The same discipline decides quieter cases. A chargeback belongs to the day the bank pulled the money. An annual insurance invoice belongs to all 365 days it covers, not to the Tuesday it arrived. Ad spend belongs to the day the platform charged it, whichever day its orders came. None of these is exotic; each is a decision most spreadsheets make by accident. The pattern is one rule per event type, chosen once and applied forever, which is what makes arguments about a number end quickly.

Once recognition is fixed, a closed day stays closed, and that is the entire foundation of a number worth reading at breakfast: yesterday's profit can only mean something if nothing that happens today is allowed to rewrite it.

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.