IFRS for SMEs / For bookkeepers / Customer receipts: revenue or settlement of an invoice?
Customer receipts: revenue or settlement of an invoice?
The rule
Revenue is recognised when the company delivers the goods or services: for a company that invoices, when the invoice is raised (Section 23). The customer's payment then settles the trade receivable. Booking the payment to sales as well counts the revenue twice and leaves the invoice showing as unpaid.
How to check
- Before booking a receipt to sales, check whether the customer has an open invoice.
- Allocate the receipt to the invoice it pays.
- At year end, agree the debtors list to the trade receivables balance: old invoices that were paid but never allocated are a sign of double-counted revenue.
Cash sales
A company that does not invoice, such as a shop taking card payments, records revenue from the receipts themselves.
Worked examples
| Bank statement line | In or out | Categorise to |
|---|---|---|
PAYMENT FROM MEGA TRADERS | In | Trade receivables |
PAYMENT RECEIVED INV 1043 | In | Sales, unless an invoice was raised |
Related
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