question abt advance income

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December 26, 2011 at 1:12 pm #51110
targetacca
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a customer paid 1794(full payment for six months package) in dec 2011. But he ll start using the services only in feb 2012. how do we account for this? pls help frnds.
December 26, 2011 at 4:30 pm #92243
nokia
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At dec 31 Cash(ASSET) would be debited and advance received(LIABILITY) would be credited
the total payment of 1794 for six months will be divided by six.
the answer would be allocated as income in each of the month from feb to july by debiting the advance received(LIABILITY) and crediting Service Income(PnL).
December 28, 2011 at 4:16 am #92244
Vipin
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this is deffered income. deffered income is treated as liability in SOFP.
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