CA Venkata Koteswararao Mogali (job) (45 Points)
20 January 2021We bill our client for the services provided every month on 1st day of subsequent month. And the revenue is recorded for each month on the 1st day of subsequent month. The same happens for march month.
Is the same correct, i.e say march 2020 bill being raised on 1st april 2020 and recognizing it as revenue for 2020-21 instead of revenue for 2019-20?
Spurto Consultancy Services
(Consultant)
(1891 Points)
Replied 20 January 2021
You have to follow accrual system of accounting and take the income into consideration in FY 2019-20
CA Venkata Koteswararao Mogali
(job)
(45 Points)
Replied 20 January 2021
Accrual system emphasis on provisioning of expenses, but no where recording of income on accrual basis is suggested.
Spurto Consultancy Services
(Consultant)
(1891 Points)
Replied 22 January 2021
The basic concept in accrual accounting is that the income of your business is recognised when it is earned. This brings in the matching concept of accounting.
Accordingly, the business events are recognized by matching the costs incurred with the revenues earned at the time when the event/transaction occurs.
Abdul Razak
(Accountant)
(95 Points)
Replied 24 January 2021
Hi Venky,
Please follow
Accrual Basis Concept & Matching Concept
Accrual Basis
Record transactions when revenue earned & when expenses incurred.
Matching Concept
Recording of expenses associated with revenue earned and recognized during the same accounting period.
when revenue earned
Accounts Receivable/Customer a/c Dr (Under head - Debtors-Balance Sheet)
To Revenue a/c (Under head - Direct Income - Profit & Loss Account)
when expenses incurred
Expenses a/c Dr (Under head - Direct or Indirect Exp - Profit & Loss Account)
To Accounts Payable/Supplier a/c (Under head -Creditors-Balance Sheet)
CAclubindia
