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Billing in Advance (Deferred Sales)
An example of deferred sales might be a yearly maintenance contract where you bill annually for work to be performed in the future. In order to spread the sales evenly across the period covered, you would need to make a journal entry each month to recognize one-twelfth of the sale. When you do the billing, post the sale to a liability account for deferred sales. Set up a standard monthly journal entry for one-twelfth the amount of the sale for each month of the year, moving it from the deferred sales liability account into the revenue sales account.