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Credit Memo/ Refunds.!?

I am Working in service industry like Health, Once the approval for treatment came from Insurance i make the invoices, But later on customer will not appear for taking their approved sessions,,,,!

 

During the month i make invoices against approvals shows high profit , but later it decreasing as we make credit memo for no shows of customer...

 

So there is no fix value of Profit & loss account , when we make credit memo it effect the invoice and then monthly statement also changed...Need your suggestion Please

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Question ajoutée par Khaliq Raza MBA MS CFE AFA , Finance Manager , Vertex Trading
Date de publication: 2017/03/26
AKSHAY LOSALKA
par AKSHAY LOSALKA , Lead Finance Analyst , Flipkart Internet Private Limited

For a service industry revenue should be recognised on completion of the service. And hence based on past trends provision in respect of credit memo for current month should be recognised.

For Ex - If a total of Rs. 100 approval is received during the month and on the basis of past trend it is seen that 40 % of the customers do not appear for approved sessions, then revenue to the xtent of 60% should be recognised in current month. The same should be actualised in the next month based on actual credit memos 

 

Mohammad Iqbal Abubaker
par Mohammad Iqbal Abubaker , Jahaca Pty Ltd - Accounts Administrator , Jahaca Pty Ltd - Accounts Administrator

I think the best Answer added by: Nishant Bhatia  Finance Manager 13 days ago

Soliman Abd  ALmalak Gendy
par Soliman Abd ALmalak Gendy , مدير ادارة مراقبة حسابات , الجهاز المركزى للمحاسبات

It's performed when a customer requests a refund of already paid product or service, custoner agree to keep the refund money in the balance and to be able to apply it on new purchases of product

Nadeem Alam
par Nadeem Alam , External Auditor , by ICAP with KPMG Taseer Hadi Khalid & Co. (THK), Chartered Accountants, is member firm of Klynveld Peat Marwick Goerdeler

Credit memo is issuing to the customer for any discount, drop price or against a claim approved by supplier.

Nishant Bhatia
par Nishant Bhatia , Finance Manager , Bikram Industries Intl Fzc

From the provided information it seems you are having a monthly closing cycle for your P&L. 

 

The best practise would be to make a provision of services that have been billed but no provided. 

Thereafter in the preceding month appropriate reversals need to be done.. 

 

More information would be needed for helping you with a numerical example.

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