How do I record a pre-payment from a customer on my financial statement? I have ordered the parts for the particular job, but have not yet received an invoice for those. So, if I print off my financial statement today, I feel like it is overstated because I show the deposited funds in my current assets, with no liability.
USA Customer pre-payments and how handled on a balance sheet
- Thread starter Reece
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smallbushelp
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Yes, you will show the deposited funds on your balance sheet when you receive the money, but don't worry so much about the offsetting liability for the expense of the parts. It's normal to have this type of temporary difference. Once you receive the invoice, you will expense the cost, either via COGS or general expense.
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It depends if youre accrual or cash basis. Assuming your cash basis, debit cash and credit revenue. As you pay for inventory, debit cogs and credit cash. If ur accrual basis you debit cash and credit the liability account deferred revenue...as you recognize that revenue you debit the deferred liability revenue (liability) and credit revenue...accrual for the inventory would be to recognize the expense as items are received and decrease the associated liability qhen paid (crediting caah)