<What happens in the case of stage payments where a stage may be
on Delivery at site and another after certification of Tests and Trials after due erection<
Doug, without getting too involved with accounting practices(I'm not an accountant, but, every month have to go through these things with a corporate controller), if the issue is really "payment", it probably is simply recorded as a receivable(with extended payment terms). If, however, the issue is multiple billings(with normal payment terms), the revenue would be recognized as it is billed, with any revenues that have extended obligations being amortized over the period of the obligation. For example, a maintenance contract that lasts over 12 months, might be billed each month(not that common) or it might be billed in one shot. But, since the obligation to provide maintenance lasts for 12 months, the revenue would normally be amortized over the 12 months with 1/12 being recognized each month. Another example, might be a product which is sold and the billing for the product and the billing for the installation are on the same invoice. The billing for the product would be recognized immediately(assuming no long term obligatino) while the billing for the installation might not be recognized if it is not going to take place shortly.
There used to be all kinds of different ways that company's handled these things. More recently, standardized accounting practices have narrowed the wiggle room. |
