Objective:
This accounting policy outlines the treatment of deposits collected in advance, specifically focusing on those received within the last three months of the accounting year.
Scope:
This policy applies to all deposits received by the company for goods or services to be provided in future accounting periods.
Policy:
a). Definition of Deposits: Deposits are funds received by the company from customers or clients in advance of providing goods or services. These funds represent an obligation to deliver goods or services at a future date.
b). Recognition of Deposits as Deferred Income: Deposits received in advance of providing goods or services within the last three months of the accounting year will be recognized as deferred income on the balance sheet.
c). Measurement of Deferred Income: Deferred income from deposits will be measured at the amount received from customers or clients.
d). Presentation in Financial Statements: Deferred income from deposits will be presented separately on the balance sheet under current liabilities.
e). Recognition of Revenue: Revenue related to deposits recognized as deferred income will be recognized in the income statement in the accounting period in which the goods are delivered or services are provided.
f). Disclosure: The company will disclose the accounting treatment of deposits collected in advance, including the recognition of deferred income, in the notes to the financial statements. This disclosure will include the amount of deferred income recognized as of the reporting date and any significant judgments or estimates made in determining the timing and amount of revenue recognition.
Effective Date:
This accounting policy is effective for all accounting periods beginning on or after 31 January 2023.
Review and Updates:
This policy will be periodically reviewed to ensure its continued relevance and compliance with accounting standards. Any updates or revisions will be approved by the board of directors and communicated to relevant parties.