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Advanced payment received from a customer can be considered as revenue earned. Yes/No. What is the basis for your answer?

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Question added by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.
Date Posted: 2014/12/06
Lesley Lanag CMA CPA
by Lesley Lanag CMA CPA , Senior Accountant , Takaful Emarat Insurance (P.S.C)

I agree with Mr.  Mir.  Advanced payments from customers are liability following the revenue recognition principle. Revenue is recognized when earned regardless of cash collection. They shall be recognized as deferred revenue which is a liability account. 

VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

Realization Concept: According to this principle revenue is said to be realized when goods or services are sold to a customer. It emphasizes the fact that the mere receipt of an order for goods or services cannot be taken for the realization of revenue. So advanced payment received from a customer cannot be considered as revenue earned.

Mir Mujtaba Ali
by Mir Mujtaba Ali , Internal Audit Manager , Confidential

No.

A customer advances are usually stated as a current liability on the the balance sheet of the seller

Irene Porcalla
by Irene Porcalla , Senior Accountant , SDAC Consulting DMCC

Advance payment received from client is considered as liability as revenue should be recognized once it is earned.

sayeed khan
by sayeed khan , Senior Accountant , Al Darwish Engineering

No, It cannot be considered as Revenue ,suppose if we received the advance against supply of materials but in future we fail to supply the goods ,in this case we have to return the advance money to our customer.So the best practice most of the companies followed is to consider advance as liablity until we supplied all the goods.

Munir Ahmed
by Munir Ahmed , Accountant , B.B.K Foods Hattar

no

 

georgei assi
by georgei assi , مدير حسابات , المجموعة السورية

No mind can not even be achieved revenue and remain registered boost to the customer's favor until the Revenue officially

Khaled Mohee Eldeen Abbas Mahmoud
by Khaled Mohee Eldeen Abbas Mahmoud , Chartered Accountant # 10465 , Self-employed

I agree with answers provided NO

Deleted user
by Deleted user

Under the accrual basis of accounting unearned revenue is a liability untill the risk and rewards of ownership has been transferred to the buyer and the revenue could be recognised.

Mohammed Hussain Shah
by Mohammed Hussain Shah , Finance Manager , Al-Naba Contracting Co. Ltd

Advance payment received from the customer is in token of order / contract confirmation and to facilitate your working capital needs. It can not be recognized as a revenue immediately. It can be recognized as revenue upon approval of the progress/ partial billing by the customer. In case of one time delivery / service  it can be recognized as a revenue in one go provided the bill rendered is approved by the customer.

It may be called as unearned revenue, deferred revenue or income received in advance and treated as a liability. Its treatment is just opposite to that given to earned revenue not billed , work-in-progress not billed etc.

FITAH MOHAMED
by FITAH MOHAMED , Financial Manager , FUEL AND ENERGY CO for transportion petroleum materials

NO