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Financial Statement
You are in charge of a storage shed business. You recognize sales when the shed is fully installed in the customer’s yard. Your company takes 25% deposits on all orders. At the end of your accounting cycle, you have $500,000 in customer deposits. How do you state and properly account for this activity in your financial statements and why?
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Dr. Cash 500,000
Cr. Unearned Revenue 500,000 Unearned Revenue since you are not yet recognizing it. You might also want to look into the percent completion method, but that is a choice that should be made by each company based on the specifics of the case. |
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