USA Billing 30 days in advance per the contract terms.

[moreofless]

We are a nonprofit organization. We lease all the computer equipment as one master lease for all of the nonprofits we support and then have a contract with each of them for them to pay us the full amount of the lease. The contact states we are to bill them IN ADVANCE in June and December. The June invoices are current year revenue. The December invoices are revenue for the following year. PER THE CONTRACT we billed these entities December 1, 2022. That is in my accounts receivable detail and is part of my accounts receivable balance on December 1, 2022. However, the revenue will not be recognized until 2023. Since the contract states we bill them IN ADVANCE, shouldn't this be part of the accounts receivable balance at December 31, 2022? Our auditor want to reverse this accounts receivable.

Thoughts?

 

[kirby]

Need more information:
The invoice sent out in June is for what months of use of the equipment?
And same question for the invoice sent out in December.

 

[moreofless]

The contract states the invoices are sent out in 30 days in advance so June would be for July and December would be for January. The terms are payable in 30 days.

So per the contract the invoices for January were sent December 1, 2022. The entry made when the invoices were sent was:

December 1
Debit Accounts Receivable
Credit Deferred Revenue

January 1 (new fiscal year)
Debit Deferred Revenue
Credit Revenue Earned

Payments applied like any other accounts receivable when they were received.

 

[Kat Maple]

Unfortunately, auditor is correct. For December invoice, you do not EARN the income until January. So you can and should send the invoice in Dec but the receivable for Jan has to be booked in Jan.

 

[moreofless]

Unfortunately, auditor is correct. For December invoice, you do not EARN the income until January. So you can and should send the invoice in Dec but the receivable for Jan has to be booked in Jan.

The receivable is not for January. The contract states we bill in advance. Not only that but the terms are such that the receivable is actually due before December 31.