Provided you’re rendering services under a specific contract over a longer period of time, your sales revenue should also be spread over this same period.

If the service is constant meaning that the content and volumes do not differ from month to month, the revenue could be equally measured to the months. That is if from March 2013 until March 2014 you’re providing a monthly service with an annual fee, each month 1/12 of the fee should be recognized to your sales revenues.  Continue reading →

A revenue is when you’ve sold something and you make an out an invoice to your client. Either you have contractual rights to make the invoice or the client is in your store, just bought something and you have every right to make the invoice.

However, what happens when you cannot just yet make out the invoice – either you are not yet allowed by the contract or you don’t know who to make the invoice out to or some such. What happens then?

In a case where you’ve made expenses, you plan to sell something to the other party and you cannot just yet make out the invoice, you account for deferred revenues showing that you have earned them, but in your accounting they are not yet accounts receivables.

Essentially in your accounting the entry is as follows:  Continue reading →

Every now and then it may happen that you make a sale as selling to your customers – i.e. wrong prices, wrong items etc. Like your suppliers make such mistakes, so can you.

When such a situation arises, what you do is credit your sales and send a credit invoice to your customer. Your accounting entry is as follows:

Db Sales revenue

Cr Account receivables

Note how you don’t account for an expense but you decrease your sales revenue. Alongside with taking a bit off from your revenue, you also decrease the balance sheet item, receivable balance.  Continue reading →

Usually, when selling both goods and services, you are bound to sell them together within one package at some point. Normally, provided you sell both separately, you would have a price for each of them and recognizing them in revenue isn’t at least an issue when it comes to determining the sum to be recognized.   Continue reading →

Selling goods and services both together means that you need to consider their treatment separately.

First and foremost you must understand that provided this service is just setting up the goods (i.e. a machine), it’s recognized alongside with the revenue from the sale of the item itself. Now provided though that this service is something else than just setting the item up, it needs to be recognized separately from the revenue of the item itself.  Continue reading →

Under the accrual basis of accounting, revenue is recognized when it’s earned. That’s the fundamental in short when it comes to accounting for revenue in a business that’s using accrual basis of accounting. A fundamental which has a little exception in the form that if you’ve got serious doubt you’ll receive money for the sale, you should account for it only when the money is received. But that’s an exception. Continue reading →

Every now and then it may happen that you have to credit your sales – either returned goods, improper amounts on the invoice etc. There may be numerous reasons, but fact of the matter is, that sometimes you do have to do it.

Now whilst in essence it’s not that difficult, you just recognize an invoice with a negative figure and add it to proper client account, something you do have to be watchful with however is the period which revenue you’re decreasing. In the middle of the period it’s not a question, but if it’s prior period sales (and especially if it happens in January that you have to credit December sales), the credit should also be put into the period the sale it relates to was made.
Continue reading →