Payment received in advance- the journal entry?

Question

If a payment on goods sold is received in advance, how is this journal entry registered?

2) how are the interests earned from this advance payment accounted for?

Answer 1

1) If a payment on goods sold is received in advance, how is this journal entry registered?
Let's say you received $1,000 for goods you have yet to deliver to the customer. Your journal entry:
Dr Cash 1,000
Cr Unearned sales revenue 1,000

When you deliver the goods to the customer, you:
Dr Unearned sales revenue 1,000
Cr Sales revenue 1,000

2) how are the interests earned from this advance payment accounted for?
If you placed the $1,000 in the bank and it earned $5 interest, you:
Dr Cash 5
Cr Interest income 5

Answer 2

I am familiar with the revenue recognition principal. My problem is that when the payment is received in advance of delivery what substantiates the journal entry? Can a journal entry be made without proof of payment? And if a journal entry is made without a substantiating document is that in accordance with GAAP?

Like for example the CEO received the money from the customer can the transaction be registered in the name of the salesman? I understand the answer is obvious but I could use some advise as to where the accounting standards spell out clearly how advance payments are to be recorded in reference to FASB or IASB because I have to argue that in the Court of Law and I am not a lawyer.

Obviously it all starts with the journal entry and my understanding is if there is no substantiating document then no journal entry but I have to prove that is the accounting standard to prove the corporation is not in compliance with law because if that standard is deviated from then the reports to the SEC are also not in accordance with GAAP.

Answer 3

Revenue Received In Advance