work in the food industry at a fine dining restaurant. We have some companies th

Question

work in the food industry at a fine dining restaurant. We have some companies that rent out our space for private parties and things in that nature. Before we provide them with their needs and wants for the desired date a payment is made from the customer to our restaurant. There is no way that the owner would allow someone to rent out space prior to getting their payment even before we perform our duties to their requests." Now when you think about your statements, how long would the revenue be deferred if they paid on Jan 30 and the party was in May?

Explanation / Answer

If the Party in the month of May, then the revenue should be recognised int he month of the May itself as that is the month when we have performed our responsibility and in this case the party. As all the responsibilities relating to the part has been done in May, so the revenue should be recognised only in the month of May. Further, it has noting to do with the prior receipt fo the amount. As far as we have performed our duty we are eligible to claim our amount or as per contract beween both the counterparts.Early payment will be considered as advance amount.

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