Most Implementations:

• the default (recommended) - usually used when your subscription revenue will be realized in the 'short' term.
  

1. Deferred Revenue Account = Current Liability
   

2. Recognition Income Account = Income Account
   

3. Recognition Account = [Deferred Revenue Account]
   

Some Implementations:

• optional (expert users only) - usually used when SOME of your subscription revenue will be realized in the 'short' term and some in the 'long' term.  This is a GAAP/IFRS compliance issue (how 'current' is defined varies) and may not be a requirement - review with your CPA.

1. Deferred Revenue Account = Non-Current Liability
   

2. Recognition Income Account = Income Account
   

3. Recognition Account = Current Liability

• you need to move the current term subscription amount manually from (1) the Deferred Revenue Account (debit) to (3) the Recognition Account (credit) yourself, based on your requirements for the split of the current/long term liability amounts.
  

All Implementations:

When the Invoice for a deferred revenue subscription is validated, all of the future revenue is credited to the Deferred Revenue Account.

At the interval you define, for example each month, a portion is debited from the Recognition Account and credited to the Recognition Income Account.

There is a great webinar by my colleague, Nick Kosinski, that goes over how the deferred revenue works within the CRM, Subscription and Accounting Apps:

https://www.youtube.com/watch?v=JaXVeENeiJo