PDA

View Full Version : Recording revenue for financial institutions


diana_a22
Jun 13, 2008, 02:35 PM
If your main line of business is makig investments and giving loans, how would you record revenues on your income statement? Would the whole amount received be considered revenue, or will one need to subtract the principal first? What would be the correct accounting entry for this?
Thank you.

morgaine300
Jun 13, 2008, 04:30 PM
On the loans, only the interest (or any fees or whatever) is your revenue. Getting a loan repaid isn't revenue. The loan is a note receivable, and when repaid, comes back off that receivable. You need to know for each payment, how much is interest and how much is revenue. And when the end of a year comes, you need to know how to accrue any interest amounts that have not been paid yet.

Same concept with investments you're making. The investments are assets. Any actual earnings are what you record as revenue. But how you go about doing that will depend a lot on what types of investments you're making. (Investing in a stock is entirely different than investing in real estate, just for example.) And you have to know what revenues/losses you can record and when, and how you have to account for them.

Don't take this wrong because I'm merely trying to be realistic, but I think you might be in a bit over your head and need more help than just trying to ask us a few questions. Not only do you have the basics to deal with, but you're in a specialized area and some things could get complicated. And... it sounds like you don't even know some of those basics.