HVAC and other specialty contractors regularly utilize preventive maintenance and service agreement to provide a steady flow of income. Here are some useful accounting tips to consider if you are a QuickBooks user.
If you receive a prepayment for services that have not been performed, this is considered deferred revenue. According to proper accounting techniques, Deferred revenue is actually a liability until the service has been performed.
If your business does not receive payment for preventive maintenance or service agreements until the service is performed, then you do not have a liability, and do not need to consider this information. Normal accounting usually bills when the service is performed.
There are several steps involved when you have deferred revenue: