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gorisley · Sep 2, 2010, 02:18 PM

Due to the given circumstances... we had to produce an invoice for work to be done in the future... how do I account for that now? Would it be considered an accrued a/r? Do I still show this as sales?? Which of course will not match the expense! Help!

pready · Sep 2, 2010, 02:45 PM

Debit Cash if cash received or Accounts Receivable for the amount and Credit Unearned Revenue (Liability account) for the amount.

When work is done the entry will be: Debit Unearned Revenue for the amount and Credit Service Revenue (or appropriate revnue account) for the amount.

morgaine300 · Sep 2, 2010, 07:02 PM

If you are only producing the invoice, but they have not paid anything, you don't have any unearned revenue, nor is there actually a receivable. An unearned gives you an obligation for something that's already been paid. You cannot record a receivable unless you've done something to make it payable to you - a piece of paper doesn't make it payable yet. If these accounts were there when you do financial statements, it wouldn't be correct.

The question is whether this is going to get paid in a short period. If so, yes you could debit the receivable and credit the unearned revenue, and then it's only a temporary little glitch. Then when you get paid you can record your cash and dump the receivable and the unearned would be left and appropriate. Or you do the work in the meantime, can dump the unearned, record your revenue, and then the receivable is left and appropriate. If you're on a calendar year, I assume this'll get taken take care in some fashion before you do financials.