Accrued Revenue

Hi all,

Am on a team creating the chart of accounts for a certain company and need your help. Our client has a product XXXX they sale which requires them to invoice it at a forecast/provisional price during the month and then at the end of the month the actual/final price for that product is known therefore requiring that a manual journal be raised so that the price adjustment is booked to both the SoFP and the IS.

The double entry for the price adjustment is of course Dr Receivables and Cr Revenue Account, that’s if its favorable. The biggest challenge I have is the naming of the Receivables/Current Account to which the debit will be posted. Have in mind that the entry is a manual journal and cannot be posted to the Accounts Receivables Control account. Previously they used to have an account Called “Accrued Revenue – Product XXXX” but I wasn’t comfortable with having the word accrue in a Current Asset Account.

This brings me to my question. Should current assets have the wording Accrue in there naming and if not then what would be the appropriate name for the account?

Thank you.

Comments

Accrued Revenue

Ashley Seebaluck | | Permalink

Hi David

From the terminology you have used, I presume you use IFRS. 

I think it's fine to use the term Accrued Income. On the balance sheet, this would still appear within Trade and Other Receivables, and in the notes to the a/cs, you can describe it as Prepayments and Accrued Income. I have come across this term in various a/cs of listed companies (Have a look at Hays 2011 A/cs).

Hope this helps.

Best of luck.

Fmaat's picture

Standard and actual prices

Fmaat | | Permalink

You're invoicing @ standard price actual price then determines whether there is a charge or credit due to the customer!!. The thing to do would be to raise invoices or credit notes, when these are posted all will take care of themselves. If you want to do journal entries before invoces or credit notes are posted you can dr trade debtors and cr accrued income which u then reverse once invcs/cr notes are posted. If the price variance is in customers favour u cr trade debtors and dr accrued income. Better still I'd do it all through a variance contol a/c. Hope this helps

Thanks Ashley that was

DavidPhiri | | Permalink

Thanks Ashley that was Helpful,

 

Fmaat, its the Trade Debtors account thats the issue. since the journals do not post to Control Accounts. The naming of the account to where the debit gos that the issue.

Fmaat's picture

Reconcile or...

Fmaat | | Permalink

Control a/c is the Sales ledger control a/c.Trade debtors in the balance sheet can consist of slc + . Are u new to accs sir! 

Fmaat, thanks for your    1 thanks

DavidPhiri | | Permalink

Fmaat, thanks for your contribution.

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