My company was set-up using the accrual method of accounting because our customers and clients often receive discounts for "prepaying" for services in advance. Those prepaid services are not refundable to clients after 90 days, and some of those clients will go years before using all their prepaid services. The consequence of that is that my deferred revenue account has got too large over time and I'm wondering if I can just transfer some of that revenue to income - and what the best way to handle that is in my accounting software (quickbooks).
Do I simply create an income line on my P&L for "prepaid services" or something of that nature? Is it that simple? I just don't want to screw it up.
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If the prepaid services are not forfeited, you should not transfer them to income. They remain a liability of the company as long as your clients can still use them, even if they are longer refundable.
If the prepaid services are not forfeited, you should not transfer them to income. They remain a liability of the company as long as your clients can still use them, even if they are longer refundable.
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