[limweiwen11]

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

[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.