Prepaid Services (Unearned Income, Unearned Revenue)

[Derek Atkins]

Hi,

rshgeneral <rshgeneral at yahoo.com> writes:

[snip]
> The second solution proposed merely posting a payment to reflect the receipt
> of monies, and then creating and posting an invoice on the date the service
> is provided.  This prevents the reporting problem described above because no
> invoice is posted upon the receipt of the money and it also makes sense. 
> One should only create an invoice when a service or sale is created. This
> method also requires a general ledger transaction to reduce the Prepaid
> Service liability and credit the sale.  So again, as above, in the end
> everything is fine.  However, this solution, and the solution above, both
> lack the ability to reflect the location of the money.  If I have money in
> my checking account, accounting reality should reflect this fact.  The
> problem seems to stem from the fact that taking a payment restricts the
> account to which the payment should be posted to A/R.

This is not a problem...  Remember that a Liability is just a Negative
Asset.  So when you Process Payment you in effect make A/R negative, so
it acts like a Liability.

You can run the Receivables Aging report to see how much each Customer
has on account (or how much they owe you).

I must admit I'm not exactly sure what you mean by the "location of
money".  The money is in your Checking Account, so that's the right
location in my mind.  And by Process Payment it's attached to the proper
Customer in the A/R system, so you know why you have the money.  Maybe
I'm just not understanding your terminology?

Hope this helps.

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-derek

-- 
       Derek Atkins, SB '93 MIT EE, SM '95 MIT Media Laboratory
       Member, MIT Student Information Processing Board  (SIPB)
       URL: http://web.mit.edu/warlord/    PP-ASEL-IA     N1NWH
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