When a client pays for work to be done in the future by way of a deposit or retainer, this is not income, this is a liability called unearned revenue.
According to the GAAP matching principal income and expense must be matched to the period of time each occurred. To properly book the transaction the monies received would be booked into an unearned revenue account, and recorded as an income when goods or services have been provided.
In some industries it is required that funds received in advance of providing goods or services be placed in a separate bank account and only be moved to an operating account after the goods or services have been provided. This is basically what escrow is in relation to real estate and what is required of attorneys who work on retainer.
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This entry was posted by Tena Chase
on Saturday, May 22nd, 2010 at 9:45 am and is filed under GAAP.
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About The Author
Tena L. Chase has over two decades of experience directing financial accounting and business management in a variety of industries. Her work has resulted in significant savings and increased profitability for her clients. She is skilled at ensuring strict adherence to governing polices, regulations, and standards and she has an unwavering commitment to help her clients achieve strong financial performance while upholding the highest ethical standards of the accounting profession.
Highlights of Work Accomplished for Past Clients include:
* Identified more than $500,000 in assets that had been inadvertently written off; added assets to balance sheet and notified tax accountant of changes.
* Discovered and corrected $100,000 in overstated expense and liabilities, resulting in increased net income and owner equity.
* Recommended and set up credit card processing and created Web site to establish organization’s online presence.
* Streamlined billing and accounts payable functions, requiring less time and making information more accessible.
* Increased employee benefits at no additional cost to the employer, while saving the company time and money in benefits administration.
Tena is Licensed by the NACPB as a Certified Public Bookkeeper (CPB) and an Intuit Certified QuickBooks ProAdvisor. She holds a Bachelor of Arts degree in Strategic Management from Dominican University of California, a Bachelor of Science degree in Business Administration from Capella University, and three Associate of Science degrees in business from Mendocino College (Accounting; Small Business Management; Business Administration.) Tena was included in the
2009 edition of Stanford Who's Who. Want more information? www.tlcbusinesssolutions.com/tena.html
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