> Proper accounting is to recognize the revenue and costs of a sale in the same period. > So you don't get to claim any profit until you complete the work you w

> Proper accounting is to recognize the revenue and costs of a sale in the same period. > So you don't get to claim any profit until you complete the work you were paid to do. Correct. For anyone who's rusty on their financial accounting and interested: Assets - Liabilities ≡ Stockholder Equity This is the fundamental identity in financial accounting, and most financial statements are really just different ways of breaking this identity down. Usually it's written as A ≡ L + SE, but I find A - L ≡ SE to be easier to explain. If you receive a cash pre-payment, you record an increase in the assets, but you also record an increase in 'unearned revenues' - a liability account. Your profit is, essentially, the difference in stockholder equity from one period to the next, so you've had no profit or loss so far (as far as the books are concerned, you're right back where you started). You also record all costs associated with the revenue in the same period as the revenue payment. This is separate from the 'unearned revenue' liability account. That prevents people from boosting their bottom line in a given period by getting a lot of pre-payments, without recording all of the costs that will eventually be incurred by following through on the service itself. (And the prepayment creates an obligation to follow through, which is a liability). Once you perform the task, you've earned the revenue, so the unearned revenue gets transferred to an equity account. Then you've earned a profit, which is the difference between your cash received (equal to now-earned revenue) and the costs associated with performing the job. So if you've already incurred the costs but have not yet followed through on the service itself, you're actually making a loss on paper so far, because you've earned $0 in revenue, even if you have the cash on hand. (This is highly oversimplified, just in case there are any accountants on HN, but I figure any people who missed the chance to take Financial Accounting 101 may appreciate understanding how some of this works. Even if you hire someone else to do the finances of your startup for you, it really helps to have an idea of why two actions that have the same 'real' outcome can have very different effects on your financial health on paper!)