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rupert1
Level 1

Unearned Revenue - Recording Transactions for Cash and Accrual Reporting

Financial planning firm provides service for an annual fee. The fee is billed quarterly in advance. Looking for guidance on how to properly report the following scenario in QBO:

 

Annual fee will be $4,800, paid $1,200 per quarter in advance. Firm needs to send client an invoice for the quarterly fee due in advance (it's not an invoice for service already performed, but instead an invoice for advanced payment due for services to be performed).

 

New client's first payment is due on 11/1/18 and covers the period 11/1/18 through 1/31/19.

 

Firm needs both cash basis and accrual basis financial reporting as of 12/31/18:

  • Cash basis income should be $1,200 (actual amount received).
  • Accrual basis income should be $800 (2/3 of the retainer is earned from 11/1/18 through 12/31/18)

I've read some of the previous discussions on unearned revenues and issues with JE's, but I'm having some trouble making it all work in my scenario. I would appreciate any guidance on the following steps:

  1. invoice to client for the quarterly fee to be paid in advance
  2. payment received by client for quarterly fee in advance
  3. Steps required on 12/31/18 to move unearned revenue to income account and have the proper cash/accrual amounts reported.

Thanks in advance.  

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