Revenue recognition

1. On receipt of advance

Cash A/c       Dr   120000

To XYZ  A/c          120000

(Being advance from XYZ shown as liability)

2.  At the end of each month

XYZ A/c    Dr                 10000

To Service Income A/c   10000

(Being accrued income)

Note:- here entire liability-XYZ is transferred to service income equaly over 12 month(i.e 10000). In case of delivery below 100 or zero delivery NO additional entry will be required. However for months exceeding delivery of 100 following additional entry will be required

i.e for march

Cash A/c   Dr                  4500(30*150)

To Service Income A/c    4500(30*150)

(Being additional income)

3. At end of year

Service income A/c Dr 110000

To P&L A/c                   110000

(Being closing entry)

Note:- Balance liability of 10000 will be there and 2nd entry to be passed in next January