Amc income treatment and expense settlment treatment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2017 Dear All An automobile workshop company provides AMC facility to its customer. The company charges an anuual fee from customer and provides free of cost services to its customers. The customer paid fees for the period Feb 1, 2017 to Jan 31, 2018. Books are closed on March 31 every year.

Questions:

1. Should the company recongnise the income for only 2 months during FY 2016-17 and treat the amount received for another 10 months as deferred income?

2. How should the billing for free of cost services be done in the books and how should the accounting entries be passed?

Any help in this regard is highly appreciated. Thanks

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 February 2017 1 Recognize only 2 months income during FY 2016-17 and treat 10 months income as prepaid income.
2 No billing is required, as no payment will be received for this service, only charge the cost of services as expenses in the books.
Service tax applicable on the annual fee.

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