Q: If work done and invoiced in one year (eg 2009) is not received until the following accounting year (eg 2010), in which year does the received money get accounted?
Oct 05 2010
Answered by: Clive Lewis Ask a question
For most businesses income is recognised as sales (sometimes called turnover) when the work has been completed.
In most cases the point at which the work is completed is clear-cut, for example when goods are delivered to a customer’s premises. On occasion, however, this may be more complicated, for example, on a long-term contract to build a new motorway. In this case an estimate has to be made of the value of work completed at the end of the company’s accounting year even if that work has not been invoiced.
Payment of an invoice should not determine when income is recognised as sales. However, it is prudent to examine the unpaid invoices at the end of a year to assess whether any invoices might represent a bad debt for which a provision should be taken
So in this case, work done and invoiced in 2009 but paid for in 2010 will be recognised as sales in the 2009 financial report.
Comments