Replies to post #180766 on PCT Ltd (PCTL)

[papadedavid]

You may be right on that...anyway this is HUGE imho. It will get noticed over the next weeks.

[beer$$money]

I would like to point out that it is not on the Books as Account Payable.
CURRENT LIABILITIES
Accounts Payable on the Books is $60,854

Advances payable $1,450,000

https://www.otcmarkets.com/filing/html?id=15354526&guid=tdxwkqgnYFzMdth


How to account for customer advance payments

A customer may pay in advance for goods being delivered or services being provided. Possible reasons for a customer advance can include:

Bad credit. The seller is unwilling to advance credit to the customer and so demands payment in advance.

Custom product. A product may be so customized that the seller will not be able to sell it to anyone else if the buyer does not pay, so the seller demands advance payment.

Cash basis. The customer may be operating under the cash basis of accounting, and so wants to pay cash as soon as possible in order to recognize an expense and reduce its reportable income in the current tax year.

Reserved capacity. The customer may be paying in advance in order to reserve the seller's production capacity, or to at least keep it from being used by a competitor.

For these reasons or others, a seller may receive an advance payment before it has done anything to earn the payment. When this happens, the correct accounting is to recognize the advance as a liability, until such time as the seller fulfills its obligations under the terms of the underlying sales agreement. Two journal entries are involved. They are:

Initial recordation. Debit the cash account and credit the customer advances (liability) account.

Revenue recognition. Debit the customer advances (liability) account and credit the revenue account


https://www.accountingtools.com/articles/how-to-account-for-customer-advance-payments.html