Accounting for Prepaid Services

pterabitepterabite Member Posts: 1

I'm new to accrual accounting and a little lost on how to enter my income in Wave. My services come in packages of sessions. Every product is paid for in full up front, and then used hour by hour over six months. We don't do invoices at all. So, when I receive an order, should I be placing it in a Liabilities "Customer Prepayments" account? And then, as each hour is used, doing a journal entry to move the associated funds from the Customer Prepayments account to the Income "Sales" account?

If they never complete all of their sessions, where does the leftover cash go when the package expires? Does it just get moved to Sales with a journal entry, and any payroll liability entries reduced to zero?


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