Deferred Income

Deferred Income

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Good Day to you,

*l've actually posted the same question yesterday and gotten some replies on the post but the system seems to have block my post somehow and i have to re-register with a new account, if you find my post familiar and has advise me earlier on, i will be thankful if you can advise on my query further. " )

Here's the story,

In 2013

Was told that deposit is also considered as deferred income which will affect the net profit and so i made the following entry:

Dr  Bank  USD1,000

Cr  Advance Rec'd  USD1,000

In 2014

Sales invoice for the deposit is created to the customer in 2013 and payment is only receive (in a different currency) in 2014, i've made the following:

Dr  Advance Rec'd  S$750

Cr  Sales (SGD)  S$750

I only got to realise that i shouldn't have made the above entry as my bank account in the system does not show the receiving amount.

The bank account in my system does not tally with my bank statement either. I hope someone will be able to advise me further.

Thank you in advance!

Replies (7)

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By johngroganjga
17th Oct 2014 09:11

As I said yesterday, you will need to decide whether the sum in question is a deposit, which is one thing, or income received in advance of the period it relates to, which is another thing.

It can't be both at the same time.

Which is it?

Thanks (1)
Replying to Brend201:
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By iForgotHerName03
17th Oct 2014 09:33

 

 

Hey John~

Yes, saw your last post yesterday, it will be income received in advance.

 

Thanks (0)
By johngroganjga
17th Oct 2014 09:36

So best if you don't call it a deposit, as that will cause confusion.

So what it the starting point before you make the entries to recognise the fact that income received in one period relates to the next period.  Has the customer paid the money and it's in the bank?  if so where has the receipt been credited to?

Thanks (0)
Replying to Vallery Lee:
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By iForgotHerName03
17th Oct 2014 10:07

Started the wrong way

 

At first i have created the sales invoice in 2013 to customer for payment, Dr Debtor Cr Sales (USD).

After compiling all the documents that are needed to audit for Year 2013 my auditor was checking with me if i have any deferred income that may affect the net profit outcome, and i was told that deposit is considered as one.

Thinking aback, my auditor may have misunderstood me when i said "deposit from customer" because what i was referring was i have created a sales invoice for my customer for deposit payment however i have not yet receive the money. Therefore, i was suggested to make entry as Dr Bank (USD) Cr Advance Rec'd in my General Journal and i pull out the entries i've made earlier as Dr Debtor Cr Sales (USD) for that transaction.

Looks like i have mess up everything "(.

In 2014, we have receive the deposit payment from customer (with a different currency) and is now in our bank.

So now i am stuck on doing receipt for this transaction which i couldn't cast it to anywhere as i've started it the wrong way.

Thanks (0)
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By jndavs
17th Oct 2014 10:18

Total receipts?

Are you saying that you have actually received $1750 in total and that the sale is now complete?

If so, your entry is likely to be

Dr Bank        750

Dr Advance   250

Cr Sales                 1000

Thanks (0)
Replying to Helen Piper:
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By iForgotHerName03
17th Oct 2014 10:32

 

 

Hi jndavs,

I thought i might confuse you guys with the figure so i didn't show the actual amount. The actual amount is as follows:

Dr  Bank (USD)  USD65,815.27

Dr  Bank Exch (USD)  USD17,289.67

Cr  Advance Rec'd  USD65,815.27

Cr  Advance Rec'd  USD17,289.67

 

and i have received SGD83,348.46 of a different currency in our bank.

And yes the invoice payment has been completed.

 

Thanks (0)
By johngroganjga
17th Oct 2014 10:43

This isn't difficult.  Once

This isn't difficult.  Once you have raised an invoice the payment of it etc. will take care of itself.

What you need to look at is the credit entry you made to sales when the invoice was raised.  If that includes income that you want to be shown in next year's P&L, and not this year's, take the income you want to defer out of sales and put it in deferred income.  Then prepare your accounts, including deferred income in creditors.  Then in the next year reverse the entry.

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