Deferred Revenue

[bradleyandrewdavis]

Hey everyone, I'm very young in the accounting field, and got thrown into a job at a friend's company. I was tasked with the bookkeeping for the prior 3 years of business. Now that I am through 2013, I am coming up with some questions that are now important. One question I have is, if he is using the cash basis, does he recognize deferred revenue? He has recurring monthly revenue with the service he sells that he collects on the first day of the customer's monthly cycle. I am inclined to recognize the revenue when received being cash basis, but I just wanted to put this out there.

As an aside, it might be worth a discussion on which method to use going forward. I had been using cash basis because all I had was bank statements on money in and out. And is in a small dollar LLC, so I just assumed it would be worthwhile to use cash basis. Any thoughts there?

Thanks

 

[kirby]

In pure cash basis accounting, when cash is received you record revenue. There are, however, modified cash basis methods recognized by IRS. So you might look at IRS website to study those.