We sell service contracts or as you call them agreements for a year or longer. On the opposite side, we contract a vendor to supply the actual service to be provided. When we invoice the customer in advance, the agreements amortize the amounts monthly to represent the service being provided and revenue is recognized. Wonderful...however, when we pay all up front for the vendor to provide the service, we do not have the same ability to allocate the cost of the service contract over the period of the agreement. So it looks like the costs of the agreement are always more than the revenue until the last month or period of amortization of revenue. We have tried to allocate this cost ourselves but you can not post job cost entries and or general ledger entries to the agreements to move the allocation amount from the prepaid on the balance sheet to the actual expense monthly of the agreement. Why does the module amortize the revenue evenly over the period of the agreement, but we are not able to do the same with the costs if the same situation is in place in reverse for the vendor?

by: Tina M. | over a year ago | 3 Service Management