Advance payment received against sale of flat, so this amount in which head of balance sheet and p&l to be show?
Please give appropriate accounting treatment
Thanks in advance
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 10 June 2020
This is similar to deferred revenue.
Debit cash in assets; credit deferred liability in liabilities.
When you hand over the keys to the house,
Debit Deferred Liability in liabilities; credit revenue in income statement.
Padmanabhan
(Student)
(1321 Points)
Replied 10 June 2020
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 10 June 2020
In between make another entry:
House Cost is 10,000₹. Advance received is 5,000₹.
Bank 5000
To Deferred Revenue Liability 5000
which means, you received an advance which cannot be treated as revenue as the performance obligation to surrender the flat for consideration has not been met. When flat is completely sold,
Deferred revenue 5000
To Revenue 5000
Complete revenue recognised. I think this is because there is a liability component to provide the service and recognise revenue when all performance obligations are met. It like subscriptttttions.
Or else, when there is a fulfilled contract:
Bank 5000
Receivables 5000
To Revenue 10000
I forgot the right accounting treatment but its usually, recognise revenue when all performance obligations are met. The first one is better.
Padmanabhan
(Student)
(1321 Points)
Replied 10 June 2020
"Live class on Python for Financial Analysis: Unlocking Efficiency in Accounting and Finance"
GST Live Certification Course (39th Batch) - April 2024 (Weekend Batch) (With Certificate)
CAclubindia
