Murad (Accountant) 30 March 2020
Company X sells software products to clients. A client approaches for a specialized software which X outsources to a sub-contractor. The software's cost would be say $2,500.
As at the year end, sub-contractor has not completed the product yet and they have been paid an advance amount of $1,000.
Could someone let me know
1). Which IFRS standard applies for this transaction.
2). Entries to be passed current year (Software not completed/delivered yet).
3). Entries to be passed after product is delivered.
prasad Nilugal (Accountant and GST Practitioner . ) 19 April 2020
suppose we are passing in the Books of X & co ,
1) Sale of software to A & co
A & co A/c Dr $2500/-
To Sales A/c Cr $ 2500/-
( booking of sales entry )
2) Company X has given same job to sub contractor with advance ( principal & Agent )
Advance to sub contractor A/c Dr $1000/-
To Bank A/c Cr $1000/-
( Advance payment to sub contractor )
Note - Advance to sub contractor A/c will be under head Loans & Advance in Asset side of Balance sheet
3) after software received form sub contractor
Sub contract Expense A/c Dr $ 1000/-
To Advance to sub contractor A/c Cr $ 1000/-
( Software received form sub contractor , and advance adjusted )
4) Software delivered to A& co and money received
Bank A/c Dr 2500/-
To A & co A/c Cr 2500/-
( Being payment received after software delivered )