Hello,
The Company Policy is to issue proforma invoices to allow customers paid in advance. I have two questions:
1. Is it mandatory in European countries to issue a proforma invoice to receive an advance payment from the customer?
2. If seller issues proforma invoices would be the below accounting treatment correct:
Step1: Issuance proforma invoice for 100 EUR
No accounting entries generated
Step2: Cash is received from Customer
DT Cash 100
CT Unearned revenue, customer advances (in current liabilities) 100
Step 3: Invoice is issued to the customer (order has been fulfilled, revenue recognition conditions are met)
DT Customer account 120
CT VAT 20
CT Revenue 100
Step 4: Clearing current liabilities
DT Unearned revenue, customer advances (in current liabilities) 100
CT Customer account 100
Customer Advances Payments
Re: Customer Advances Payments
1. I don't know (this is tax question really)
2.
Step 1 Issuing an invoice for the advance payment may have to be recognised as DR receivable CR contract liability if the customer has a contractual obligation to pay that advance
Step 2 Payment received in advance is a contract liability under IFRS 15 which is then recycled to revenue once the PO is satisfied.
https://ifrscommunity.com/knowledge-bas ... abilities/
Steps 3 and 4 are one step really as they need to be done at the same time
2.
Step 1 Issuing an invoice for the advance payment may have to be recognised as DR receivable CR contract liability if the customer has a contractual obligation to pay that advance
Step 2 Payment received in advance is a contract liability under IFRS 15 which is then recycled to revenue once the PO is satisfied.
https://ifrscommunity.com/knowledge-bas ... abilities/
Steps 3 and 4 are one step really as they need to be done at the same time
Re: Customer Advances Payments
Thanks Marek!
You said that “issuing a proforma invoice may have to be recognized as Dt Receivable and Ct Contract liability if the customer has a contractual obligation liability to pay that advance”.
Does it mean that if such obligation exists a proforma invoice will generate accounting entries as shown below:
Step1: Issuance proforma invoice for 100 EUR
Dt receivable 100
Ct uunearned revenue, customer advances (in current liabilities) 100
Step2: Cash is received from Customer
DT Cash 100
CT receivable 100
Step 3: Invoice is issued to the customer (order has been fulfilled, revenue recognition conditions are met and current liability extinguished.)
DT AR 20
DT Unearned revenue, customer advances (in current liabilities) 100
CT VAT 20
CT Revenue 100
If there is no contractual obligation, then accounting will be as described in my previous post.Am I understanding well?
You said that “issuing a proforma invoice may have to be recognized as Dt Receivable and Ct Contract liability if the customer has a contractual obligation liability to pay that advance”.
Does it mean that if such obligation exists a proforma invoice will generate accounting entries as shown below:
Step1: Issuance proforma invoice for 100 EUR
Dt receivable 100
Ct uunearned revenue, customer advances (in current liabilities) 100
Step2: Cash is received from Customer
DT Cash 100
CT receivable 100
Step 3: Invoice is issued to the customer (order has been fulfilled, revenue recognition conditions are met and current liability extinguished.)
DT AR 20
DT Unearned revenue, customer advances (in current liabilities) 100
CT VAT 20
CT Revenue 100
If there is no contractual obligation, then accounting will be as described in my previous post.Am I understanding well?