2 ms·
> payments for services not rendered yet should not be recognized as income, but instead kept as a liability This entirely depends on whether you are operating
by throwawayboise 6y ago
> payments for services not rendered yet should not be recognized as income, but instead kept as a liability
This entirely depends on whether you are operating on a cash or accrual basis. Both approach are valid (at least in the USA) and cash basis is often used by small businesses.
- sorbits 6y agoI use the word “should” as per RFC 2119, i.e. recommended (as opposed to “must” = required). Though the IRS does limit the types of businesses that can do cash-basis accounting, it would be businesses without inventory, and who does not offer credit to their customers, e.g. a hairdresser would probably use cash-basis accounting, but more complicated businesses would not, certainly not a business that needs its own billing system :)