Prepaid Services (Unearned Income, Unearned Revenue)

[Derek Atkins]

rshgeneral <rshgeneral at yahoo.com> writes:

[snip]
> When I provide the service for the client I would:
> -Debit (Decrease) my Prepaid Services account to reflect the removal of this
> liability.
> -Credit (Increase) my Sales (Income) account to reflect the provision of
> services and the fact that the income is now earned.
> -In the accounting equation, my assets have not changed, but my liabilities
> have decreased.  This reflects  the fact that the income is now earned and
> has now increased my equity.
>
> Derek noted that, "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."
>
> Okay, based on that statement,  it appears that the confusion is arising
> because my accounting (under the advice on my father who is an accountant)
> transactions are different than those performed by Gnucash.
>
> For future reference, it appears you should not have a Prepaid Services
> account.  When I Process a Payment I should transfer to Checking at that
> time and not to a Prepaid Services account.  This will allow accurate
> reporting and it will reflect the fact that the funds are in my checking
> account.

That's because GnuCash can do things for you that you need to do
differently on pen-and-paper.

> Thank you Derek for your patience.

-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
       warlord at MIT.EDU                        PGP key available