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+--- Thread: Due Date for Debts (/showthread.php?tid=7940)
Due Date for Debts - bchan369 - 05-06-2010
I would like to know for education industry, is there any IAS definition of "Due Date" for a private school to define lastest by when students' course fee will be due for payment?
- ciapk - 05-06-2010
Please elaborate with scenario [bold],
- bchan369 - 05-06-2010
Ok, for instance
On 1-January, student A enrols a course with course duration 1 year and course fee $12,000.
The school recognizes the course fee by 4 terms (1 term = 3 months). So the school recognizes $3,000 on 1-January, 1-April, 1-July and 1-October in the accounting book.
Now assuming student A pays course fee $4,000 on 1-January and none afterwards.
May I know what's the due date (according to IAS, if applicable) of the outstanding $2,000 due from the 2nd recognized course fee?
Is it 1-April (the date to recognize this 2nd portion of the course fee) or 30-June (end of the school term for this 2nd recognized course fee)?
- ciapk - 05-06-2010
Dear in given scenario,
1st Jan is not a due date for recognizing 3,000 as income as the institute has received the amount on 1st Jan without providing any services, so on 1st Jan if fee is received should be treated as a fee received in advance which is a liability for the institute, at the end of each month 1,000 will be transfered to income thus reducing the liability by the same amount, at the end of March there will be no outstanding liability and total income for the quarter will be three thousand.
If a student pays 4,000 on 1st Jan, its liabilty of the institute to provide him services up to end of the April and 1,000 will be transfered to income the end of each month. After April, an asset as receivable from student of 1,000 will be created at the end of each month and income will be increase by the same amount till the end of the year.
- bchan369 - 05-06-2010
Great, thanks for your explanation.
May I know if it's quoted from IAS or it's just a general practice for education industry?
- ciapk - 05-06-2010
Dear, its in accordance with accrual basis of accounting as described in IAS
- bchan369 - 05-06-2010
Well noted. Thanks a lot )
- ciapk - 05-06-2010
mention not -)