Hi,
Please give me a clarification regarding this issue.
If an Annual Maintenence Contract for 1 year is falling in 2 financial years, the invoice is raised and the amount is received in the beginning of the contract, then how do we recognise the income?
Do we bifurcate the amount between the two years or do we recognise the entire amount in the year of receipt?
Usually while undertaking the maintenance contract itself charges for AMC will be received. So at that time u can treat it as a liability and treat it as revenue as and when the maintenance work is done.
If the AMC charges is on higher side you can split the amount in two effected year otherwise the same can be consider in the year the bill raised.
Rajesh
Dear Sujata...........
first of all it depend on the policy of the company .
but while framing its policy compnies are required to follow " Accrual" Concept (AS-1)
But All AS applies to only material items
If The above mentioned AMC is not so mateiral then full revenue can be recognosed otherwise it should be splitted
CAclubindia
