prepaid accounts
By rocky2007
@rocky2007 (4)
Canada
March 27, 2007 6:07pm CST
Does anyone have experience with maintaining prepaid accounts. I work for a small credit reporting company and we have about 300 clients. The clients give me an amount once a year and then they can order reports wich cost is deducted from their prepaid balance. Should taxes be charged on the deposit? Do you know a good accounting software or method that would allow for easy maintenace of the accounts. right now, i just credit the accounts in the amount of the deposit and any invoice reduces the credit.
1 response
@roshnichaudhary (1160)
• United States
14 Apr 07
Hi I am a cost accountant but not in practice for last three years nor do I have any book for reference. But whatever I remember is that actual amount paid is considered for the tax purposes not the total prepaid account balance for your clients. Prepaid cost is first deducted from the revenue of your clients and then at the end of the financial year the remaining amount after paying you will be added to their income account for taxation.
For you:
do you return the rest of the money or you carry forward to next year. I think the amount which you deduct from their prepaid account will be income for you and so taxable. the remaining amount will be added to your clients income amount.
