Income of future periods - income that has not yet been earned

In the nineties, when business only came to our lands, the calculation of its efficiency indicators was carried out quite simply - if the money is received, then everything is fine, and you can walk, but if there is no money, then there is nothing to talk about. In fact, the concept of profit did not exist, and only the money that the founders had in their hands mattered. In principle, at that time such an approach made sense, because the businessman had no idea how long his business would last, and how long he could live.

Fortunately, times change, and today we can talk about a certain stability in our economy and calculate profits, as it is done in the West, on the basis of the fact that the company exists almost forever. This means that the profit should be determined for each individual period, depending on how much it actually earned for this period, regardless of when the company receives money. Since the company is not going to close, the movement of money is of secondary importance, while the objective reflection of profit in accounting allows you to make important management decisions.

Revenues of future periods just refer to the situation when the arrival of money on the account and the actual receipt of income are different. In this case, we can say that the money was received earlier than the company made the necessary efforts to earn them. As you have already understood, the accounting of the organization's income must be kept on the fact of committing to it the actions of an economic nature (the production of goods, its shipment, the actual provision of services to the client, etc.). However, how to determine the exact time period for which the income will be correct?

It's pretty simple. In the case of goods, it is believed that the company earned money when these goods became the property of the buyer. In the case of services, when the service was provided, for example, the client was tonsured. The movements of money are connected with the concept of liquidity of business, but not with its profit.

The fact that the money that a buyer owes to a seller for a product or service is called a receivable, you probably know. However, what to do in those cases when the buyer makes an advance payment and only then receives the goods or uses the services of the company? Here, then, the revenues of future periods come to our aid. Prepayment is a common thing to pay for the Internet, rent, etc. The client paid a fee for two years, but did not really use his right to stay in the apartment. So, you can not record income, however, and accounts payable too, since in reality the company does not owe anything to the client. Therefore, deferred income is used, reflecting the fact that revenue will be received, but after some time.

Accounting for deferred income is also used in some other cases, other than receipt of prepayment by the company. First of all, it is receiving gifts, donations and other similar, not expected income companies. To write down all the income for one accounting period would be wrong, therefore the accountant distributes it for different periods, and the amount that will be recorded in profit in the future remains on the account "incomes of future periods".

Later, in the course of earning a real income by the company, for example, by providing services for renting a room, the accountant increases the profit of the enterprise, writing off the incomes of future periods.

As you can see, the general sense of accounting for future incomes is not anything complicated. Problems, however, may arise in determining the exact amount that should be left on this account, and in determining when to directly write off it. Such a skill distinguishes a professional accountant, who is always guided by the interests of the company in his choice.