[GNC] Invoice system and Deffered Income

[Michael or Penny Novack]

On 5/29/2023 5:44 PM, Sergey Mende wrote:
> Hi there,
> I am trying to figure out if the existing customer invoice system is
> suitable for my needs.
> For simplicity, let's say I have the following accounts:
>
> Current (Bank)
> Undetermined Income (Income, for bank account transactions just imported
> from the online banking)
> Deferred Income (Income, used at invoice creation to track invoices that
> are posted and sent to the customers but not paid yet)
> Income (for invoices that got paid, so the payment actually received as a
> bank transaction and processed as a payment of an invoice)
> Receivable (A/Receivable, for tracking invoices)

No, sorry, but the invoices are part of the business system and only for 
use with accrual basis accounting. Can't be used for cash basis 
accounting, which is what I sense you are thinking about when you see 
":receivables" as "deferred". You will been to familiarize yourself  of 
the differences between accrual basis accounting and cash basis accounting.

In accrual based accounting, the "income" is earned when the invoice is 
sent, the customer legally obligated to pay and  the amount goes into an 
asset account "receivables". When the customer later actually pays (you 
mark it paid) that gets transferred to cash (you bank account). If you 
don't think of "receivables" as real money, look up what a "factor" 
does. In other words, "receivables" might be collateral for a loan or 
even sold.

Michael D Novack

PS: When some of us are using the term "deferred income" it is in the 
context of tax sheltered retirement accounts. Things like IRAs and 401Ks 
(but money going into Roth IRA is after tax, would not be deferred 
income). Thus I might have a 401K through work allowing me to 
contribute  before tax income up to the regulated limit with the 
employer matching up to 3% of salary. In other words, were I selecting 
5% of my salary to go into the 401K THAT would be deferred income and so 
would the 3% matched by the employer. Not escaping income tax, just 
deferring it till after retirement as distributions are taken form the 
401K.