How to spread the effect of a sale over several months (Deferred income)

NOTE: In statutory accounts, this should appear on the balance sheet as Accruals and deferred income.

In the example below, you invoice a customer for £60,000 in January but this needs to be equally spread across the 6 months, January to June.

1. Post the sales invoice as normal.
2. Create a nominal code to record the deferred income. This should be in the Current Liabilities range in the Chart of Accounts.
   
   

   TIP: If you use the default layout of accounts we recommend nominal code 2110.

3. Post the following journal using the same date as the sales invoice:
   
   

   N/C	Name	T/C	Debit	Credit
   4000	Product Sales	T9	60000.00	0.00
   2110	Deferred Income	T9	0.00	60000.00
   4000	Product Sales	T9	0.00	10000.00
   2110	Deferred Income	T9	10000.00	0.00

   
   

   TIP: The first 2 lines of this journal move the full net value of the sales invoice from the sales nominal code to deferred income nominal code. The last 2 lines move the relevant monthly value back to the sales nominal code.

4. In each of the 5 subsequent months, post the following journal to move the relevant monthly value back to the sales nominal code:
   
   

   NOTE: You can use recurring journal entries to complete these postings. 

   
   
   

   N/C	Name	T/C	Debit	Credit
   4000	Product Sales	T9	0.00	10000.00
   2110	Deferred Income	T9	10000.00	0.00

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