USA Tracking Unearned AR

[NYC Numbers]

Hi All - I'm new to the Forum.

I have been tracking Unearned AR on an excel sheet, however, I would like to open an "Unearned AR" account in the Ledger. Can anyone please tell me what the offsetting account would be? I was thinking of setting up an "Projected Revenue" account, so that when I bill for the Unearned AR:
Dr Unearned AR
Cr Projected Revenue
But I'm not sure this is right.

Thank you!

 

[kirby]

NYC Numbers
Please help us by giving more detail about the transaction. For example, are you sending a bill in month 1 for services you will perform in month 2? Or what?

 

[NYC Numbers]

Hi Kirby,

Thank you for asking clarification.

Let me provide a simple example, of the many contracts per year (All are completed within the year, so it's short-term):

1/1/19 Contract $580K + First Payment for future work $250K
6/1/19 Second Payment due for phase 2 completion $150
10/1/19 Third Payment due for phase 3 completion$100K
12/1/19 Final Payment due for final completion $80K

I set up a liability account for Unearned Income for payments received before the work is completed and I make JEs when the funds are earned, easy enough. Keeping track of the AR for Unearned Income, however, on a separate Spreadsheet, is cumbersome. I would like to post AR for Unearned Income on 1/1/19 to track when future payments are due but I don't know what the offsetting account would be. If I would need to make reverse entries at year-end to keep books clean, it's ok, but how would you set this up to keep AR for Unearned income?

 

[AGH the CPA]

Not sure I completely understand your question but this is what we do:

Awarded project for 100k. 50% upon order, 50% upon completion. Invoice first 50% or 50k.

DR AR 50k
CR sales 50k

First month, determine that project is 10% complete.

DR sales 40k
CR billings in excess of earnings 40k

receive payment for 1st invoice
DR cash
CR AR

second month, reverse JE,
DR billings in excess of earnings 40k
CR sales 40k

2nd month end, determine that project is 30% complete
DR sales 20k
CR billings in excess of earnings 20k

third month, reverse JE
DR billings in excess 20k
CR sales 20k

3rd month end, determine that project is 60% complete
DR earnings in excess of billings 10k
CR sales 10k

fourth month, reverse entry
DR sales 10k
CR earnings in excess of billings

4th month end, project complete, invoice remaining 50%
DR AR 50k
CR sales 50k

5th month receive payment for last invoice
DR cash 50k
CR AR 50k

 

[Cheryl K]

Hi Everyone, I'm also new to the forum and I have found myself trying to single handedly do the accounting for a nonprofit organization. I've been a bookkeeper but never an accountant and I've never actually set up a company's accounting system or chart of accounts.

Our revenue is mainly from grants and insurance companies and I'm struggling to figure out exactly how to account for it.

I want to put the earned revenue on the books as its billed out which makes me think I need to debit the accounts receivable acct and credit the revenue acct. What type of account is the revenue account? Is it an income acct? Or an asset account?

Then when payment comes in I debit the cash account and credit what? I'm thinking at this point it has to depend on the answer to my above question but I'm not sure.

Any feedback is greatly appreciated and thanks!

 

[kirby]

The revenue account is an income account.
When payment comes in
DR Cash
CR Accounts receivable

 

[NYC Numbers]

I think I did not communicate clearly, no answer so far. I will ask another way.

We have been posting accruals without a problem. The problem is tracking receivables for unearned income. How would one do that?

 

[AGH the CPA]

I think I did not communicate clearly, no answer so far. I will ask another way.

We have been posting accruals without a problem. The problem is tracking receivables for unearned income. How would one do that?

I dont think you can other than the way I posted above. If its unearned, and uninvoiced, you can't put it on the books. You cannot "accrue" receivables.

 

[Wes Chumley]

Hi All - I'm new to the Forum.

I have been tracking Unearned AR on an excel sheet, however, I would like to open an "Unearned AR" account in the Ledger. Can anyone please tell me what the offsetting account would be? I was thinking of setting up an "Projected Revenue" account, so that when I bill for the Unearned AR:
Dr Unearned AR
Cr Projected Revenue
But I'm not sure this is right.

Thank you!

You probably have this figured out by now but, if I understand correctly you are invoicing a client for a job and receiving a partial payment prior to starting, then final invoicing upon completion. You don't want to book the entire starting payment as income at the time of receipt, but rather as progress on the contract progresses.
Would it make sense to set up a liability account to receive the payment to and then JE as work is completed to deplete the deposit account and apply it to the AR account balance?
Alternatively, have you experimented with Estimates and progress billing? Pay the progress invoice from the liability account with the deposited funds in it.
Maybe I'm missing exactly what you are trying to do. I'm not an accountant, I just do a lot of bookkeeping.
We do mostly consignment sales and I have had to be creative in keeping track of sales and what we have paid, what we owe, how much is income, how much is liability, etc.

 

[Bilal Siddiqi]

Hi All - I'm new to the Forum.

I have been tracking Unearned AR on an excel sheet, however, I would like to open an "Unearned AR" account in the Ledger. Can anyone please tell me what the offsetting account would be? I was thinking of setting up an "Projected Revenue" account, so that when I bill for the Unearned AR:
Dr Unearned AR
Cr Projected Revenue
But I'm not sure this is right.

Thank you!

You just need to open 2 AR accounts
1 is earned AR and 2 is unearned AR
When project started put all amount in sales revenue and AR unearned..
When you need to issue a bills then
Pass following entry
DR AR Earned
CR AR unearned