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Level 1

Issuing invoice and recognizing income

Hi all,

 

My company provides home improvement services and we issue an invoice once the job is complete.  Usually, from the time we sign the contract and the time the work is completed and the invoice is issued, it takes about 1-2 weeks.

 

My question is, how do I record the income for August 2019 if the contract was signed on August 29, 2019 and the invoice was issued on September 13, 2019 and the terms are Net 45, pushing the payment due date to October 27, 2019?

 

We do not take any deposits or any pre-payment?

 

Thank you

1 Comment
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Level 3

Re: Issuing invoice and recognizing income

This depends on whether you are doing accounting on a cash-basis or GAAP accrual-basis.

 

For cash basis, you record income when cash is received from customer.

 

For accrual-basis, generally the income is earned when the work is completed, so that is when you would recognize the income.  That is also usually when you would send the invoice to customer.  

 

The date you sign contract is not normally an event that generates an accounting transaction.

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