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a new interesting query

CA vikash sureka (chartered accountant) (129 Points)

01 September 2007

Hi,

can any body tell how the telecom companies like airtel or hutch, will recognise the revenue from the life time prepaid services. is it will over the20 yrs , or on the same yr of receipt. Give a thought and reply

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6 Replies

(Guest)

I dont think there is anything novel in this. For example if you buy prepaid of 500 Rs (juat an example) it will stand as creditors in the company's books. As and when you make calls it will be shown as revenue (Balance will continue to be shown as creditors till it is used up). Lifetime prepaid card also follows the same principle. There is nothing new in this except for the fact that the validity of the card will not expire even if you do not recharge. It is a technical point only NOT anything related to accounts or finance. This is my view and I MAY BE WRONG.

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(Guest)

TO add to my reply above - Vikas if you are thinking about the initial amount that we pay, please note that it is mostly processing cost/Taxes etc... and will be recognized immediately as also the corresponding expenses.

(Guest)

hi, Aithough i am not a CA student, i appreciate that your question is very interesting.let me know the views of other students. NITIN

Vinayak Nayak (student) (122 Points)
Replied 02 September 2007

yes i think the amount paid in the beginning wil be accounted there itself and the amount which we have to pay i.e. 200/- in six months which is compulsory to keep the phone active will be spread in the 6 months or alternatively the amounts paid in the six months i.e. total amount recharged would be distributed in six months. for eg. if a person pays 495/-in the begging it would be accounted at that moment itself and if a person pays 200 in first month 100 in 2nd 300 in 3rd 300 in 4th 200 in 5th 100 in 6th then (100+200+300+300+200+100) / 6 = 200 would be distributed all over the 6 months. as a person should recharge atleast once in six months of 200/- to keep the account going bye. i may be wrong