Auxiliary Standard Operating Procedures

 

SUBJECT:

Income Clearing Object Code 1804

SOURCE:

Auxiliary Accounting, Financial Management Services

DATE ISSUED:

June 2016

DATE OF LAST REVISION:

 

N/A

ASOP NO:

22.0 

RATIONALE:

When an organization receives revenue and the appropriate revenue object code cannot be determined at the time of receipt, the funds can be posted to object code 1804 - Income Clearing. This document provides examples for use of this object code.

ASOP:

The income clearing object code 1804 provides a temporary “place-holder” for funds received by an IU account when the actual object code cannot be determined.  This is particularly helpful when a unit receives revenue for a variety goods/services and the breakdown of the revenue type is not received until after the initial deposit of funds.  Funds posted to this object code should be moved to the correct object code and reconciled on a regular basis (daily, weekly, or monthly).  Any amounts remaining in this object code at the end of the month should be identified and moved to the correct object code at the beginning of the next month.      

 

 

Example #1 – A unit receives several checks for various services it has provided but the breakdown of the services is not yet received.

 

Cash Receipt (CR)

Checks received

Object

Code

Object Code Name

Debit

Credit

8000

Cash

$10,000

 

1804

Income Clearing

 

$10,000

 

Two days later, a report is generated from the unit’s internal system that breaks down the services that were purchased with the funds deposited by the CR:

 

Distribution of Income/Expense (DI)

Move to correct object code.

Object

Code

Object Code Name

Debit

Credit

1804

Income Clearing

$10,000

 

1413

Beauty Shop

 

$1,250

1415

Bowling

 

$2,000

1454

Memberships

 

$5,050

1461

Guest Services

 

$1,700

 

 

Example #2 – A unit receives payments in period 1 for a variety of events that will take place over the next several periods.  The breakdown of the events is unknown at the time of deposit.

 

Period 01

Cash Receipt (CR)

Checks/Cash received

Object

Code

Object Code Name

Debit

Credit

8000

Cash

$25,000

 

1804

Income Clearing

 

$25,000

 

The report that details the events paid for in period 1 is received at the end of period 1:

 

  • Fall Opera, taking place in period 2 - $8,500
  • Fall Concert, taking place in period 3 - $10,500
  • Fall Speaker, taking place in period 3 - $6,000

 

 

Period 01

AVAD Entry –

Move revenue to deferred income

Object

Code

Object Code Name

Debit

Credit

1804

Income Clearing

$25,000

 

9400

Deferred Income

 

$25,000

 

In period 2, the Fall Opera revenue needs to be recognized:

 

Period 02

AVAD Entry –

Recognition of earned revenue for period 2

Object

Code

Object Code Name

Debit

Credit

9400

Deferred Income

$8,500

 

1xxx

Revenue

 

$8,500

 

In period 3, the Fall Concert and Fall Speaker revenue needs to be recognized:

 

Period 03

AVAD Entry –

Recognition of earned revenue for period 3

Object

Code

Object Code Name

Debit

Credit

9400

Deferred Revenue

$16,500

 

1xxx

Revenue

 

$16,500


 

DEFINITIONS:

Deferred Revenue – Revenue received but not yet earned (i.e., goods or services have not yet been provided).

RESPONSIBLE

ORGANIZATION:

 

Auxiliary Organizations