What is the Deferred revenue ?
And its treatment in books of accounts and the Accounting standard covering the topic
Whether Deferred revenue is applicable in case of goods or services or both?
Please reply as soon as possible.
1 Replies
RAMESH CHANDRA SHARMA
(munka istentisztelet)
(899 Points)
Replied 21 October 2013
DEFERRED REVENUE IS NOTHING BUT AN UNEARNED REVENUE ...MEANS THE REVENUE THAT U HAVE YET TO EARN....I.E. ADVANCE RECEIVED FOR A SERVICE THAT U WILL BE GOING TO PROVIDE IN NEAR FUTURE....FOR EXAMPLE - THE ANNUAL SUBSCRIPTION FEE THAT A MAGAZINE COMPANY RECEIVED IN ADVANCE IS NOT RECOGNIZED AS REVENUE AT THE TIME THE FEE RECEIVED AS THE COMPANY HAS YET TO PERFORM ITS LIABILITY TOWARDS SUCH PAYMENT...AND THE ACCOUNTING TREATMENT FOR SUCH IS AS FOLLOWS...
THE COMPANY RECEIVED RS 12000/- AS ANNUAL SUBSCRIPTION FOR A MONTHLY MAGAZINE --
WHEN ANNUAL FEE RECEIVED IN ADVANCE-
BANK A/C DR. 12000
TO DEFERRED REVENUE A/C 12000
AFTER 3 MONTHS WHEN U HAVE SENT 3 MAGAZINES SO ENTRY WILL BE
DEFERRED REVENUE A/C DR 3000 (ON PROPORTIONATE BASIS)
TO SALES A/C 3000
AFTER 6 MONTHS
DEFERRED REVENUE A/C DR 6000
TO SALES 6000
AND ON THE BALANCE SHEET DATE IF ANY AMOUNT RETAINS WITH DEFERRED REVENUE A/C ...IT WILL TREATED AS LIABILITY AND SHOWN IN CURRENT LIABILITY....
DHANYAWAAD
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