Re: [SL] How to account for pre-payments

[Paul T. <pt...@wa...>]

I think you do it correctly.
However, there are *some *countries where tax-authorities have a very
narrow-minded view on 'work in progress' like this, combined with rules on
what part of work should be taken as profit when.

In case of doubt, check with them (tax authorities)  also.

2009/5/15 Jersey <je...@ib...>

> Hi there,
>
> I am not an accountant... but I have sometimes 50% of invoice value
> prepayments long before the final delivery is due. I treat them like a loan
> (At the end of the day actually it is :)). I created a "service" item with
> income pointing to liability account called "deposit received". I invoice
> the client with this item before finilising the contract. And on final
> invoice I credit that item. This way I do not have a false, artificial
> profit/loss in case I receive the order (and payment) one financial year
> and
> I deliver the goods next financial year.
> Reverse applies when I do prepayment.
>
> Am I correct? Any comments.
>
> Regards
>
> -----Original Message-----
> From: Mark Phillips [mailto:mar...@mo...]
> Sent: 07 May 2009 01:59 AM
> To: sql...@li...
> Subject: Re: [SL] How to account for pre-payments
>
>
> On May 6, 2009, at 10:31 AM, Paul Tammes wrote:
> > Why prepay at all? Especially an accountant should see the logic
> > that one
> > has to send an invoice in order to get paid.
>
> I respectfully disagree. It is quite common for many businesses to
> require a retainer or "advance billing deposit". Some will not begin a
> project until funds sufficient to cover the anticipated work are
> deposited, even as much as 100% of the anticipated billing. Some of
> these will produce an invoice based on an estimate or contract, then
> amend if required.
>
> Others do not invoice until the end of a project. In the meantime, the
> estimate serves as the controlling document, with funds advanced and
> charges tracked against the estimate. At the time of invoice, the
> charges and payments are tallied and posted so they appear on the
> invoice and are "booked" in accordance with the accounting policies of
> the client.
>
> FWIW, I have no idea how this fits into SL, so my comments are more
> general in nature. That said, I have created such processes in the
> software applications we maintain and develop for clients. As another
> poster wrote, the point is to make sure the value of the service or
> product is compensated, or more plainly, to make sure you get paid.
>
>
> Mark Phillips
>
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