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Cash reporting of Advances on AR


I'm writing this to the users list, because I'm not sure what the 
correct behavior should be, looking for an accountant to weigh in on that.

In the past year, we've started collecting payment up front as an 
overpayment/prepayment, into a liability account. We keep it there until 
the final invoice is sent for the project, and then we apply that 
pre-payment to the last invoice.

As best I can tell, the Accrual-based reporting all looks correct, but 
I'm thinking if I need to do a cash-based income statement, that 
prepayment should show up somewhere (and I'm thinking it would be 
taxable -- we're collecting the cash now and doing the invoice later -- 
but we need to pay tax on the cash basis).

I'm testing LSMB 1.4 to see how this works, and what I'm finding is that 
the overpayment received does not show up anywhere on the income 
statement, until it's received against an invoice. As I write through 
this, I'm having a hard time seeing any other way to do it -- we need to 
apply the overpayment to an invoice to know what account to put the 
income into -- and when we do apply that overpayment, it will show up as 
cash revenue for the date the payment is applied (I'm assuming, have not 
verified this).

Is it routine in cash reporting to not report deposits as income? If so, 
this should be fine for us. The biggest issue here is knowing when the 
overpayment was applied -- you cannot see any indication of the 
overpayment getting applied on the invoice itself, only on the general 
ledger for the overpayment account.

John Locke

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