Discussion:Deferring revenue on sale of equipment
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| is advocating accrual basis accounting would result in smaller tax liability, I disagree. | is advocating accrual basis accounting would result in smaller tax liability, I disagree. | ||
| - | Mark up is 120%. Client orders equipment after the deposit is received. Client issues full invoice when order is received and deposit is then paid. Commissions are paid when the deposit is received and deducted in year paid. Even if the alternative method of reporting with the accrual basis is applied, commissions paid and expenses directly related to the sale will then also be deferred and not be deductible if income relating to that commission is deferred is that correct - matching convention. | + | Mark up is 120%. Client orders equipment after the deposit is received. Client issues full invoice when order is received and deposit is then paid. Commissions are paid when the deposit is received and deducted in year paid. Even if the alternative method of reporting with the accrual basis is applied, commissions paid and expenses directly related to the sale will then also be deferred and not be deductible if income relating to those expenses are deferred is that correct - matching convention. |
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Revision as of 12:09, 18 August 2009
Discussion Forum Index --> Basic Tax Questions --> Deferring revenue on sale of equipment
Discussion Forum Index --> Tax Questions --> Deferring revenue on sale of equipment
| 18 August 2009 | |
| I have an issue with a quickbooks consultant and would like to receive a second opinion.
Client sells equipment and is a cash basis taxpayer. Client receives a cash deposit (40%) when contract is signed commissions are immediately paid out of this. Contract specifies required deposit is non-refundable. Sometimes customer will pay more than required deposit which is sometimes refunded when deal is cancelled but never the required deposit. Equipment is not held in inventory, it is ordered after deposit is received. In my opinion deposit is constructive receipt and also the monies that are possibly refundable and included in income. I have included deposits received in income in the year received even though equipment was not delivered. Quickbooks consultant is citing the following: Rev. Proc. 2004-34 can be found at : http://www.irs.gov/irb/2004-22_IRB/ar16.html#d0e2084 My response has been that the scope here is accrual basis not applicable hoping it would go away. Now it seems the quickbooks consultant is advocating accrual basis accounting would result in smaller tax liability, I disagree. Mark up is 120%. Client orders equipment after the deposit is received. Client issues full invoice when order is received and deposit is then paid. Commissions are paid when the deposit is received and deducted in year paid. Even if the alternative method of reporting with the accrual basis is applied, commissions paid and expenses directly related to the sale will then also be deferred and not be deductible if income relating to those expenses are deferred is that correct - matching convention. | |
