[Yolonge]

Hello Ninjas,

I have an accounting question to ask. So the broadcasting company has a year end June 30, 2016 and did an advanced billing to one customer for operating cost compensation for “calendar” year 2017 (January 1 – December 31, 2017) for program to be aired. It was originally marked as part of receivable as of June 30, 2016 and was subsequently collected after year end (July 1, 2016).

The question is, what would be the accounting treatment for this advanced billing? Would it be debit to A/R and credit to unearned revenue (liability) as it was pre-arranged contract between two parties, should it not be recognized upon billing but when cash is received marked as debit cash and credit unearned revenue?

Any input is appreciated.

Materials: Wiley book + Ninja MCQ

FAR - 83 (Jan 2016)
Study time: 6 weeks
BEC - 87 (April 2016)
Study time: 2 weeks
AUD - 92 (July 2016), (74 Feb 2016), (72 May 2016)
Study time: 4 (Feb) + 2 (May) + 3 (July) = 9 weeks total
REG - (70 April 2016)
Study time: 3 weeks

[MSC626]

Is this for FAR? If so, I haven't started that section yet. However, I used to deal with this A LOT at my old job.

1) Invoice for the initial advance
Debit to AR
Credit to Deferred (unearned) revenue

2) Apply cash receipt
Debit to Cash
Credit to AR

3) Recognize revenue when earned per agreement terms
Debit Deferred Revenue
Credit Revenue

Hope this helps.
Thanks!

[aaronmo]

I would record slightly different than suggested above given what the question asked…

It isn't revenue, its expense reimbursement. So I would have a pre-paid expense reimbursement that would offset the expense.

Debit AR
CR pre-paid Operating Expenses

When I collected, I'd have:

D cash
C AR

When expense was booked, I'd offset

D op. expense
C prepaid op expense

[Author]

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