Accounting for Income

I’m planning on doing a mega update on the site tomorrow, in the meantime I have a problem I’m trying to figure out, perhaps you can help?

Up until now I have been accounting for income in the week it was earned, ie If I made $5.00 from Google Adsense this week, I put it down as income from this week, even though I haven’t received it.

Now this works pretty well, and is fairly accurate, but recently I have been doing some consulting online, this has spanned multiple weeks and while the work is done, and the price agreed. I haven’t received payment in the week the work was done.

So should I account for this kind of income when I got the contract, when I did the work, or when I actually receive the money?

Any thoughts on this would be most welcome.




   Posted in Miscellaneous    

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4 Responses to 'Accounting for Income'

  1. Blaine Moore - September 1st, 2005 at 1:28 am

    Adsense income is a one-time thing. Somebody clicks an ad, you get a few pennies. It is like making a sale; you can attribute it to an exact moment (theoretically) so that you know when to attribute making that “sale”.

    Consulting work is a little different in that the work spans a number of weeks and can’t be attributed to one specific moment in time. I would say the time to count that income is when you invoice your client. With adsense, you don’t count the time you spend setting up ads or looking at stats or figuring out SEO as when you make the money; it’s when the visitor clicks the link. With your consulting work, when you provide the person with a bill and say, “Pay me w/i 30 days or pay so much % each week late” or whatever your practice is, then you have essentially made the sale.

    Or, you could just say, “I have the money in my hand; this is when it counts for” and wait for the check to count it. Trying to count it as you do the work is too confusing and prone to inconsistencies. For meaningful info, you’ll want to be consistent.

  2. Matt - September 1st, 2005 at 11:23 pm

    I agree. Count it when you actually receive it in that case. But count Adsense at the time it was earned so you can attribute it to specific events if you want to.

  3. A guy - September 8th, 2005 at 8:12 am

    You should account for all money earned as soon as it is earned! Money is earned as soon as the work is preformed.

    If you do consulting, you should know how many hours you have worked and when you have worked. THen at the end of the month you would probably send an invoice. Don’t wait till you get paid! This could be 30 or 60 days after invoicing! You have already earned the money.

  4. Christoph - September 10th, 2005 at 12:22 pm

    I always account for the money when I get the check. I usually do my accounting at the end of the month and then break it down per day. This way I get a pretty accurate number. Great blog by the way.

    Christoph


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