How to process deferred income (Sage)

[Biomech]

Hello all,

I was wondering if anyone had any input on this.

I supply a service to weddings, which means people often book now, with a deposit and then pay the balance in 1 - 2 years time. Obviously, this spans more than one financial year.

I was just wondering what you input and suggestions would be for dealing with this. Currently, I raise an invoice for the full amount, I receive the deposit amount and then I transfer (journal) the balance out of my sales code (4000) into a designated deferred income code (2150).

Then when a balance is paid, I move the balance amount back from 2150 to 4000 so as to reflect what I have actually made moneywise for the P/L and tax reports. (all on the advice of my accountant)

Now this seems to work fine. However, it is a lot of hassle and if I forget to move the figures back and forwards it potentially can cause a problem.

Thoughts? TIA

 

[faradaykeynes]

I think actual wedding day when your services complete should be revenue recognition day, any deposit received in advance is really a liability for business till income day and any outstanding balance after wedding day should be debtors

 

[Rolo Tomasi]

I dont think I would raise an invoice for the full amount. I would set up the customer and receive the deposit against the customer account as a payment on account. This would then show as a negative debtor on the balance sheet (ie a liability that you may have to repay). I would then raise an invoice for the full amount a month before the wedding, allocate the payment on account against this and send statement out to the customer for the balance.

The only deferred income you would have to worry about is for weddings invoiced one month but carried out the next.

 

[Biomech]

Thanks for the replies.
Rolo, I like your suggestion, the only thing I'd have to point out is that the deposit is non refundable (unless I'm feeling kind )

 

[faradaykeynes]

non refundable deposit is still considered as payment on account unless it has been established that no further event is happening , at that stage it becomes your income