We invoiced a client just before the year end for a piece of work that would not be completed until the following financial year. I therefore want to be able to make a journal entry to transfer some of the income into “Deferred income” at the year end, transferring it back to be recognised in the following year as the work progresses, using the matching principle.
I can’t see a specific Deferred income account in the chart of nominals at the moment - do I need to create one, or would an existing account serve the purpose?
There’s a nominal account 1002 which is Work In Progress. Would this be ok?
If not, creating your own is fine
Hi, thanks, yes that might do - but would it necessarily be treated as a liability? I’m probably being dim, but I’m a bit hazy as to which of the assets and liabilities nominals are classed as which! Do the numbers indicate whether they are one or the other?
If you want that deferred income showing on your balance sheet as an asset, I think you’d need to create your own code. You can also use bank accounts for these types of movements, just create a bank account called “Deferred Income” and move the funds into there.
EDIT: I’m not an accountant so you may also wish to seek further professional advice on this.
Yes, I do want it on the balance sheet, as a liability until we can recognise it as income in the following year. What number ranges could I use for this?
The number doesn’t matter too much, you could use
0001 if you like. As long is it’s between 1 and 2999.
This topic was automatically closed after 7 days. New replies are no longer allowed.