10.3 and 3.1 What is Receivable/Accrual Basis?
Problem
What is Receivable/Accrual Basis?
Solution
In a Receivable/Accrual environment, an unearned revenue account is credited and the receivables account is debited regardless of payment made against those fees. At certain intervals, the Accrual Processing program is run and unearned revenue eventually flows into the proper revenue accounts.
For example: A customer signs up for a one-year pass membership that costs $1200. The total sales tax for this transaction is $48. At the time of the registration, the customer does not make a payment. As a result of this transaction, a debit of $1248 is posted to the receivables account (payment type 96). A credit is posted to the unearned revenue account (payment type 96) for $1200 and a credit is posted to the sales tax liability account (payment type 96) for $48.
The Accrual Process will be run on a periodic basis (usually monthly) to 'earn' the revenue for the pass. In this example, the Accrual Process would credit $100 to the pass revenue account and $4 to the tax payable account with offsetting debits to the unearned account.