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Revenue Proration Calculation Explained

Question : 

 

In the Knowledge center article , proration for January is calculated as

January proration: 17 days * $100/31 days = $54.74 but 17*100/31 = 54.83

how is this value arrived at?

 

https://knowledgecenter.zuora.com/CC_Finance/D_Finance_Settings/Manage_Revenue_Rules/Components_and_...

 

Solution:

Rounding Rule of the revenue schedule has to be checked first.

Here the rounding is considered to be "Round Trailing".

 

Use case:

 

  • Service period: January 15 to April 14 of the same year
  • Invoice item amount: $300

Proration is calculated as follows:

Number of prorated days: 17 + 14 = 31 days (January and April)

January proration: 17 days * $100/31 days = $54.74

April proration: 14 days * $100/31 days = $45.26

 

January calculation:

 

One prorated day: 100/31= 3.22580645. Round to two decimal places = 3.22  remaining value: 0.00580645

 

Calculation for 17 Days: 3.22*17 = 54.74 ,

Rounding value for 17 Days: 0.00580645*17 = 0.09870965

 

April Calculation:

 

One prorated day for April: 100/31= 3.22580645 Round to two decimal places = 3.22 , remaining value: 0.00580645

 

Calculation for 14 days: 3.22*14 = 45.08,

Rounding value for 14 days: 0.00580645*14 = 0.0812903

 

Remaining rounding values from January and April then get added to April's amount: 45.08 + 0.09870965 + 0.0812903 = 45.26.






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