Accounting question and thanks to the development crew....

[Matthew Vanecek]

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On Mon, 2002-11-11 at 11:10, Rich Shepard wrote:
> On Tue, 12 Nov 2002, S. Barret Dolph wrote:
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> > I provide teachers, books, and a teaching method to schools in Taiwan.=
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> > (I provide the software they provide the hardware.) Almost all students=
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> > pay tuition for three months. At the outset this payment is a liability=
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> > (I am obliged to provide services for those three months.) It is only=
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> > after the term is over that my profit is realized. Any suggestions on=
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> > how to enter this on the Gnucash system?
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> Barret,
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>   Have you considered using cash accounting rather than accrual accountin=
g?
> I assume from what you wrote above that the students pay in advance. You =
can
> enter this as revenue when received. Create another (expense) account for
> refunds, in case you need to return any money to a student.
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>   I'm not an accountant, but I suggest that the payment in advance is _no=
t_
> a liability in accounting terms because you do not need to repay that mon=
ey.
> You are obligated to provide the services for which you were paid, but
> that's a legal liability, not an accounting one.
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>   You should ask your accountant how s/he wishes this to be handled.
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Checking with the accountant is always best.  However, I would think
that the lump sum up front would be treated as Income, especially since
you are taxed on the money in the year you receive the money (at least,
in the US).  You could do some magic with your accounts to spread the
Income over 3 months, but your Cash/Checking account would take an
immediate debit when you put the money into it.  If you have to issue a
refund, you would credit your Checking account and debit your Refunds
account, possibly separating out taxes/fees as necessary.  Your
accountant or a good accounting book ought to get you pointed right.

And what Rich said about legal vs. accounting liabilities...
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Matthew Vanecek
perl -e 'print
$i=3Dpack(c5,(41*2),sqrt(7056),(unpack(c,H)-2),oct(115),10);'
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*****
For 93 million miles, there is nothing between the sun and my shadow
except me.
I'm always getting in the way of something...

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