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-   -   Accounting entries for interim billing from financial advisor (https://www.askmehelpdesk.com/showthread.php?t=345393)

  • Apr 23, 2009, 08:59 PM
    limweiwen11
    Accounting entries for interim billing from financial advisor
    Hi,

    I am an accounts assistant and would like to ask if anybody would know how to record the following transaction.

    For professional services to be rendered by a financial advisor. The terms of agreement are that fees will be fixed at $160,000 plus out of pocket expenses and applicable taxes. They will bill a sum of $80,000 on submission of the draft information memorandum and a further $80,000 on submission of the final information memorandum.

    Assume that my company's financial year end is 31 March 2009 and I have received a billin in February for the first $80,000. The entries I thought of were to:-

    Dr Prepayments / Deferred Expenses
    Cr Other liabilities
    (Being recognition of billing from advisor for services not provided yet)

    How should I recognise the first $80k, my thinking is that it should not be to prepayments as no cash has been paid out as yet, and services have not been provided so I should not be expensing the amount?

    Any suggestions? What about treatment for the second $80k which falls outside my Company's financial year. Please remember that no services have been provided as yet?
    So accruing for it may not be accurate.

    I hope someone will be able to enlighten me. Thanks guys
  • Apr 24, 2009, 01:43 AM
    ROLCAM

    I think that what you are describing
    Are in Accountancy called CONTINGENT LIABILITIES.
    You are quite right, they should NOT be
    Included physically in the accounts.
    There is a requirement, however, that they be shown as such in the NOTES TO THE ACCOUNTS.

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