Hi,
I have a question on accounting and look forward to receive some valuable feedback. I will give out the scenario and point of the question.
Party A (Service Receiver) enters into a contract with Party B (Service Provider), the consideration for the service is payable 50% on the date of signing the contract and balance 50% one month prior to the service being provided. The service will be rendered 6 months from today i.e. the date of signing of the contract.
My question goes as follows: For the purpose of book keeping, the 50% that Party A has paid upon signing will be recorded as Advance to Supplier (Asset) and credit the bank (outflow of resources). What should be the accounting treatment for the balance 50%, how is this part recorded in the books. as the balance is also an obligation of Party A as on date but is not due yet. Payable part is certain however I seek your help on the counterpart - Debit side, where/which account should the debit be parked?
Thanks for your help!
CAclubindia
