USA Record Liability

[adnan1980]

My questions is when to record Liability, So here is the situation

Company A received computers to install Software. Installation of software will be done by Dec 31st 2018, but Computers will not be delivered till Jan 2019. Since their work and the contract was to install software my question is weather or not to record liability for 2018? Since the service is done should I accru in 2018?

 

[alcapitalus]

I'm missing data here, terms of revenues and of delivery? Assuming If you were paid prior to commencing the work or subject to receive funds upon delivery capitalize the cost as inventory offset crediting cash or accounts payable or payroll liabilities (depending on labor provider). To account for future revenue, debit receivables and credit deferred revenue. January, reclass inventory and deferred revenue to the P&L .

 

[Manish45]

I summarize the situation:

Company A gives software installation service to its customer.

I assume that you are asking from the point of view of the customer because you asked about recording the liability.

Legally, the payment may become due on the basis of contract terms. However, accounting is done using substance over form principle.

As the work has been completed till Dec, you need to record the liability. That could happen by way of the provision amount or as per actual invoice amount.


Thank you.