Client is trying to sell his construction business - to an accountant. This potential buyer has been trying to get an SBA loan for several months now and has requested YTD financials and a g/l dump through the F/S end date. As the accountant/bookkeeper I've been issuing the statements and a sales projection. Note: I've put disclaimer's all over the reports that they are "Management use Only",unadudited" and not intended for "outside parties". In July one of the salesman sold a project of a substantial size. The requested statements were provided with a journal entry on 7/31 booking the expense to sales commissions and removing his advances from the asset account "advances on commissions". The client went ballistic and stated the entry should have been recorded over the life of the contract and thus the entry distorted the Income Statement. My position is the salesman has received advances on commissions throughout the sales process and he is legally entitled to the commission once the contract is signed. This is the way the commission process has operated since I've worked with this client in 2010 (albeit on the books in a less sophisticated manner). Client is telling me the entry was not a true accrual. I disagree since the commissions were earned upon the client signing the contract. I'd appreciate any thoughts one way or another is my thinking out of line - regardless??
Side note: I'm seriously thinking of disengaging with this client due to other challenges and requests he has made regarding the financials.