If we, as lessors of machinery, collect rentals?
In advance for the next year, our accountant should narrative the receipts as a debit to cash and should make a credit to
Revenue justification (such a Lease revenue) or A differed credit account (such as differed lease income)
Answers:
Since you're being remunerated in advance, since you have actually earn the revenue, the credit will be to a deferred revenue account. That account shows up as a current liability on the match sheet.
It is a liability, because you still owe the use of the machinery for the next year to the customer. And, if something were to ensue where you could not deliver the machinery to the customer, for example, if it broke down and could not be repaired or replaced, you would owe the customer his money back. Source(s): 35 years of accounting experience
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Revenue justification (such a Lease revenue) or A differed credit account (such as differed lease income)
Answers:
Since you're being remunerated in advance, since you have actually earn the revenue, the credit will be to a deferred revenue account. That account shows up as a current liability on the match sheet.
It is a liability, because you still owe the use of the machinery for the next year to the customer. And, if something were to ensue where you could not deliver the machinery to the customer, for example, if it broke down and could not be repaired or replaced, you would owe the customer his money back. Source(s): 35 years of accounting experience
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