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When there is a sale of 20M and the entity has to provide 1M to customer to make arrangements for the contract, what will be the treatment of this 1M?
I mean what do we debit as a corresonding credit of cash 1M?
Is it a contract cost that will be capitalised and amortised as the revenue is recognised ?I wouldn’t put it in non current assets (personally) – probably Dr Prepayments Cr Cash and then set the prepayment off against the revenue as the sale is made
In kaplan text its only given that 1M will be reduced from the total txn price and total of 19M revenue will be recognizee as the sale is made..
Can we also debit deferred expense instead of prepayments?
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