Accounting for income service industry

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Querist : Anonymous

Querist : Anonymous (Querist)

21 January 2011 Can anyone please sugest me how accrual concept of accounting is used for accounting advance received for service industry.
For eg.
Cost of the project : 1000000
Advance reced against project is : 700000

Project completion cannot be measured .
Pls suggest accounting entry

How much income is to be booked on accrual basis of accounting

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

21 January 2011 As per AS-7 percentage of completion need to be calculated and accounted

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Querist : Anonymous

Querist : Anonymous (Querist)

21 January 2011 But percentange completion cannot be measured

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

21 January 2011 then no income can be booked and after measurement taken revenue need to be booked and keep the payment received as advance received under current liability

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

21 January 2011 70 % of the project cost is received as advance. What did you do with that advance instead of saying "percentange completion cannot be measured". Did you spent any amount ,out of the advance ,towars the project? If so, recognize revene on the percentage of cost incurred to the total cost method, being one of the option given in AS-7.

Pankaj Gandhi Jaiswal

Pankaj Gandhi Jaiswal (Expert)

07 June 2011 Type of services you have not mentioned, however let us assumed this is construction services, in this case you need to follow AS 7 and in this case advance is not relevant, important factor is completion

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