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Accrual accounting question I am wondering how accrual basis of accounting works in the case (construction companies) when a customer pays 1/3 payment first and
Accrual accounting question
I am wondering how accrual basis of accounting works in the case (construction companies) when a customer pays 1/3 payment first and pays the rest when the work is done and how it impacts the balance sheet and income statement.
Please correct me if my example is wrong and please upload a screenshot of the answer thank you so much.
When a case of interior design comes to my father's company, they will ask customers to pay 1/3 of the payment initially, and customers will pay the rest after the case is completed. Firstly, 1/3 of the payment will be recognized as a liability because they have not completed the work, and the rest of the payment (2/3) will be debited under account receivable. When the work is completed, and the customer pays the rest of the payment, the account receivable will be credited, and revenue increases in the income statement
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