Discussion:JE question

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Discussion Forum Index --> Basic Tax Questions --> JE question

Discussion Forum Index --> Tax Questions --> JE question

Nshnider (talk|edits) said:

3 May 2014
I have a client who builds cabinets. Makes a proposal that is accepted for 100K, gets 50K down but may not start the project for 2 months and then may take 4 weeks to complete

I take the 50k:
Dr Cash 50K
Cr Deposit 50K

Question is where do you report the other 50K of the contract? If I
Cr deferred Income (liability)
What do I Dr? (don't want to Dr A/R as it gives an inflated amount in the B/S and it is not owed yet.


Spell Czech (talk|edits) said:

3 May 2014
Do you really book an accepted proposal?

Nshnider (talk|edits) said:

3 May 2014
What is the difference between deferred revenue and deposits??? How would you track the full amount of the contract in the accounting system?

Spell Czech (talk|edits) said:

3 May 2014
If I were going to track the contracts in the general ledger, I'ld set up two accounts there. Names something like "Unbilled Gross Contract Amount" and "Unearned Contract Gross Revenue" and then keep a subsidiary ledger for those two accounts for each of the corporation's contracts.

That would be the easy part. The hard part would be the Contract Cost ledgers.

Kbairtax (talk|edits) said:

3 May 2014
You don't say what system you are using but in QB there is an Estimate option. There you would track the full amount of the project. Then you would generate invoices for the various stages. If you wanted to just receive a payment on account (deposit) then you could without an invoice and apply it later.

The Estimate does not hit the GL anywhere...it is purely for reports.

Not sure if that helps you or not.

Spell Czech (talk|edits) said:

3 May 2014
Karen, what does QB's "Estimate option" make an estimate of?

Does it generate the estimate or do you input it?

BKTax (talk|edits) said:

5 May 2014
>>What is the difference between deferred revenue and deposits??? How would you track the full amount of the contract in the accounting system?

Deferred revenues reflect situations in which money has been received, but goods and services haven't been provided. These receipts are also known as deposits, and they are not recognized as revenues in the income statement. Deferred revenues are not "real revenues" -- they don't affect net income or loss at all. Rather, they report on the balance sheet as liabilities. The journal entry to record a deferred revenue is to debit (increase) cash and credit (increase) a deposit or another liability account. When services or goods are provided, the entry is to debit (decrease) the deposit account and credit (increase) the revenue account -- the "real" one, which reports in the income statement and impacts net income or loss.

Is this an answer on your questions?

Kbairtax (talk|edits) said:

6 May 2014
Spell.....the Estimate is just a document just like the invoice. The user generates the estimate and it can list all the billable items of the project. Then as the project progresses and/or payments are made, invoices can be made from the estimate in either a line-by-line format or percentage of estimate. The estimate closes once all items have been invoiced.

If you look up progress billing in QB you will get the gist of it. But I think it will work for your situation. You can run reports on the estimates as far as what is open and what percentage complete they are. But, you are not hitting the Income Statement or Balance Sheet at all.

Outside of using the estimates to track the other side of the contract, then I am at a loss. I would think you would forgo it altogether until they become a reality.

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