Assume, for instance, that in the year to 31 December a business received £1,000 for allowing other businesses to place advert in its internal works newsletter, which it printed itself for distributio amongst its workforce. One firm, however, had not paid a bill of £100 for an advert placed in the November newsletter.
A journal entry would be required crediting advertising income with £100 and debiting accrued income with £100.
My first question is:
Is the business obligated to issue an invoice for the advertising income in November?
The other question is:
If there is an invoice, is it possible to credit advertising income with £100 and debit personal account of the debtor stated on the invoice with £100 instead of debiting accrued income with £100?
1. I think its best practice to issue an invoice, not sure if it's a requirement though unless the customer asks for a copy. You should of course keep a record of the sale. If the sale is to do with November I guess ideally it should be dated the same month, but legally its the date you raise the invoice. Could be that you invoice a month in arrears.
2. If the debtor isn't going to pay, you would need to credit debtors and debit advertising income. If you're talking about no invoice being raised, but wanting to accrue for the income, I don't think you'd be able to debit a debtors personal account unless you've actually raised an invoice. Therefore it wouldnt be a trade debtor but an other debtor and you'd have to use accrued income.
Not sure if this answers your questions?
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John
Full Time Book-keeper, Dad of 3 Teenage Girls, Part-Time Taxi Driver :)
In this case the advertising income is not part of business trade activity and the debtor is not the usual trade debtor. So if I issue an invoice can I debit personal account of the debtor instead of debiting accued income? Or nevertheless I issue an invoice or not I have to debit accued income because the debtor is not a trade debtor?
Not sure I'd agree. I think you should raise a sales invoice even if it's outside the companies core business. I would
Dr Trade Debtors Cr Sundry Income
Two other things spring to mind. Firstly is the "seller" vat registered and secondly, how are you giving the customers a receipt for the monies they've paid?
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
