Re: How to handle periodic cash reciepts vs. non-periodic accounts payable?

["Chris Travers" <..hidden..>]

On 9/26/06, John Hasler <..hidden..> wrote:
> Richard Ellis writes:
> > If they pay their rent on Oct 1 for the month of October, and then
> > suddenly decide to move out at 12:01am Oct 2 (assuming no lease clauses
> > that would preclude this) then I would return to them the amount of rent
> > paid from Oct 2 through Oct 31.
>
> You could, but under most rental contracts "unused" rent is not refundable.

Either way, there is an unfilled obligation.  So it isn't a matter of
owing money if they cancel, but owing the service so that you can
track your expenses with your income.

Think of it this way, liabilities are obligations.
> > Incoming rents are received into an AR liabilities account, with the
> > payments linked to the customer (tenant) for which they are associated.
>
> For a small business I wouldn't bother.  After all, as long as the payments
> are monthly the payment and the delivery of the service are complete within
> one accounting period.  Might be different if payments were made annually or
> you were dealing with thousands of rentals.

Agreed.  Most businesses do the "inccome and adjustment" method where
you post it as income and then adjust downward if the payments cross
accounting periods.

Best WIshes,
Chris Travers