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The Complete Idiot's Guide® To Accounting by Lita Epstein, Shellie L. Moore

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Prepaying Accounts

In some businesses, Accounts Receivable accounts not only track money because of the business, but they also track money paid in advance for services. Law firms, accounting firms, consulting firms, and other professional service organizations frequently ask clients to pay a monthly fee on retainer for services to be rendered. Usually this fee is an estimate of the services anticipated for the month.
When the money is received, an employee makes a journal entry to reflect the payment. Assume Lisa’s Candle Shop has an accountant on retainer to review its monthly transactions and prepare its year-end reports and tax returns. The shop pays $500 per month for accounting services. The accounting firm records the retainer fee in ...

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