how to recors a layby

Robin Coon robin@pjrc.com
Tue, 18 Dec 2001 19:06:14 -0800


Here is another way to look at the transaction.

You are paying the store money - a total agreed upon sum in a set amount of
incremental payments.  Once you have paid the agreed upon price, they owe
you a camera lens.

Now some basic accounting theory.  In US accounting, and I believe this
holds
true for other countries as well, an asset is defined as probable future
economic
benefits obtained or controlled by a particular entity as a result of past
transactions
or events.  A liability is defined as probable futre sacrifices of economic
benefits
arising from present obligations of a particular entity to transfer assets
or provide
services to the other entities in the future as a result of a past
transaction or events.

Now in your case, it may seem like you have a liability to the store for the
amount
of the camera.  But, you do not actually have a liability or obligation to
pay because
you do not have the camera lens.  You are gaining rights to an asset (the
lens) as a
result of your payments to the store.

How should you treat this?  I would show the deductions to your cash
accounts for
you payments as a current assets (yup, an asset).  The asset is a pre-paid
item.
This follows the definition of an asset because you are due a future
economic benefit,
the lens, as a result of past transactions, the payments.  When you receive
the lens,
the pre-paid asset can become either an asset or an expense.

Does this all make sense to you?

BTW, in the US we call it a layaway. ;o)

Robin
Oregon CPA #10056

Rob Brown-Bayliss wrote:

> > expense.  My guess is, if you can get all the money back if you change
> > your mind, without any fees, then the money the camera store has is an
> > asset (they're basically just holding onto your money as a
> > convenience), but if there's some penalty (or no refunds at all), then
> > you've bought that camera, and owe them the money.
>
> Yes, I belive I can get all the money if I change my mind...  Have never
> tested it though ;o)
>
> SO then it would be an asset, but I see it as a bill I have to pay, so I
> think I will leave it as a liability.
>
> I have put the 450 in the expense account already, and thats the bit I
> think is wrong, but it has to come to the liability account from some
> where?  Any clues?
>
> --
>
>   Rob Brown-Bayliss
>  ---======o======---
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