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How does accounting work for TryNow orders?

This document is intended as guidance for merchants. Please consult your accounting team to determine the final policies and procedures appropriate for your business.

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How Try Before You Buy works

  1. A shopper checks out with the Try Before You Buy option.
  2. An authorization hold is placed on the shopper’s card for the order value (no cash collected yet).
  3. The merchant ships inventory to the shopper, just like a standard order.
  4. The shopper tries the items at home and decides what to keep or return.
  5. After the trial, the shopper’s card is charged only for the items kept.

How TryNow Orders Appear in Shopify

  • Shopify records TryNow authorizations the same way as standard Buy Now orders. This creates reporting noise:
    • When the authorization is placed, Shopify shows it as gross sales even though no cash has been collected.
    • When payment is captured after the trial, Shopify shows returns as refunds against that original gross sales amount.
  • From an accounting perspective, the true point of sale is when cash is collected (capture after the trial).

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Tip (Shopify Reports):

To exclude in‑progress TryNow orders and view only closed/settled trials, filter for TryNowCompleted = true.

  • Closed trials: TryNowCompleted = true (order is settled)
  • In‑progress trials: TryNowCompleted = false (order still open)

Recommended Accounting Treatment

  1. At Order Placement (Authorization Hold)
  • What happens: Authorization only, no cash.
  • Accounting treatment: Record as Deferred TBYB Liability.
    • Offset is typically a reduction of revenue (contra-revenue) rather than cash.
    • You can label this as TBYB Deferred Liability
  • How to get numbers:
    • Use TryNow Order Export (filter for statuses Unfulfilled, In Transit, In Trial) or Shopify transactions that flow to your ERP.
    • Use the Current Authorized Amount column.

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Example journal entry ($200 authorized):

Dr Revenue (contra) $200
Cr TBYB Deferred Liability $200

  1. At Trial End (Payment Capture)
  • What happens: Shopper is charged for items kept.
  • Accounting treatment: Reverse deferred liability and recognize actual collected revenue.
  • How to get numbers:
    • Use TryNow Order Export → filter for statuses Completed or Charged.
    • Use the Captured Amount on Authorization column.
    • Alternatively, you can use Shopify transactions that flow to your ERP.

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Example journal entry ($90 captured):

Dr TBYB Deferred Liability $200
Cr Revenue $90
Cr TBYB Deferred Liability reversal $110

  • The $110 represents items returned → no cash collected → liability no longer exists.
  1. Post-Trial Returns (Rare)
  • What happens: Shopper returns items after trial is closed.
  • Accounting treatment: Record as a standard refund.
  • How to get numbers:
    • Use TryNow Order Export → filter for status Charged.
    • Use the Ultimate Total Paid Amount column to see final collected value.

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Example journal entry ($10 post-trial refund):

Dr Revenue (refund) $10
Cr Accounts Receivable $10

Cost of Goods Sold (COGS) Treatment

  • Shopify books COGS at shipment, which can overstate expenses if items are returned.
  • To align with revenue:
    1. Record COGS when items ship.
    2. Reverse COGS for items returned at trial end (since inventory is back on hand).
  • Result: COGS reflects only kept items, ensuring gross margin matches actual sales.

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Example COGS adjustment ($200 shipped, $90 kept):

At shipment:
Dr COGS $200
Cr Inventory $200

At trial end (returns $110):
Dr Inventory $110
Cr COGS $110

Final COGS = $90 (aligned with revenue)

Key Principles Recap

  • Deferred revenue = obligation, not cash. No clearing account required until capture.
  • Only kept items become revenue. The rest reverses out of deferred revenue.
  • COGS must be trued up post-trial to reflect only kept items.
  • Use TryNow Order Export (not Shopify defaults) for accurate accounting inputs.

Operator Checklist

  • Record authorization amounts as deferred revenue (liability).

  • Reverse and recognize revenue based on captured amounts.

  • Adjust COGS for returned items.

  • Reconcile Shopify payouts with TryNow captured amounts each close.

  • Review post-trial returns (rare) and book refunds.

By following this approach, your financial records will reflect the economic reality of TryNow orders: cash collected only for items kept, revenue recognized in line with cash, and COGS adjusted to match true sales.

Updated 3 days ago