Pre Orders as income?

[drusmooth]

Hi,

I run a business in CA and had a question. When I take pre orders (they pay me) from customers in december 04 and then plan to buy the inventory in Janurary 05, how does that get recorded?
Thanks
Brian

 

[Snipes5]

If you use the cash method of accounting, you take money into income when you receive it. This means when you have unrestricted access to the money, such as they send you a check, whether you cash it or not.

If you use the accrual method, money is taken into income when you have accounts receivable, whether you have the money or not.

Since you got the money in December, this would be counted in income in '04, regardless of your accounting method.

If you don't know what an accounting method is, you're almost certainly using the cash method.

Snipes