GAAP Requirements for Bill/Invoice?

Is this a for profit, publicly traded University? If not, then it does not need to follow GAAP. That being said, you would want to design an invoice/statement template that makes it easy for the student to understand and easy for the university to collect the funds. Not including statement balances defeats these ideals.

It's a public University, but part of a state system, and I'm quite sure that while GAAP may not strictly required, the state legislature and others have a general expectation that the fiscals are being managed to the prevailing professional standards. Thanks for your reply. Does this information change your response in any way?

Anyone else?

------------------------------------- Molly F.

This is a public University part of a larger state university system. While that may mean they don't strictly fall under GAAP, I know that they use GAAP as a general guideline in their business activities. Thank you for your reply. Does this information change your response in any way? I'm really wondering what the GAAP standards are with regards to the notion of billing/invoicing.

------------------------------------- Molly F.

There is no GAAP standard for what an invoice should contain. That falls into the UCC (Uniform Commercial Code) area of business law. Accounting majors usually have to take two business law classes, so I remember this from those classes.

GAAP would be involved with the amounts and semester dates on the invoice for proper revenue recognition. For example, if the school wanted to follow GAAP, it could not recognize the tuition as revenue until after the semester is completed. It can, however, record the cash as soon as it gets payment from students. The reasoning behind this is that the school still "owes" a service (teaching) when the student pays early in the semester.

But since refunds are only allowed up to a certain point in the semester, wouldn't the university recognize the tuition as revenue on the date no refund is allowed?

Assuming they follow GAAP's accrual based accounting, I would say that they could not do so. They are still obligated to perform the service despite the refund policy. GAAP requires that the service must be completed before revenue is recognized. However, this does not mean that they cannot use the tuition cash flow for their operational expenses until after the semester has ended. This is just a recording requirement.

The airline and periodical subscription industries are two other examples of companies that are paid in advance for services they provide later. On the other hand, long term construction companies do not have to wait until the end to recognize the revenue. They can recognize a percentage of the total revenue as each partial stage is completed and billed.

Thank you, this is extremely helpful. I'll pursue further within UCC on this matter. I totally get what you're saying about GAAP and recording of revenue. I'm still very concerned we may be at risk in terms of audit and perhaps, even more so now, legally, by not having a bill and/or invoice generated and sent through one means or another to the student/customer that doesn't contain the basics of 1) balance of the account from the prior bill/invoice, 2) summary and/or detail transaction activity on the account since the prior bill/invoice, 3) current balance due on the account given this recognized new activity.

Again, thanks for the added information on the requirements/code on which to base and substantiate my concerns to those above me.

------------------------------------- Molly F.

replying to hokie.rob, Brian wrote: I know this post was 5 years ago but I would agree you can't due this but it has to due more with the reconciliation process by AR therefore sound business processes. Sound accounting controls to reduce errors but also to prevent fraud should have AR tying each payment to a specific invoice. Therefore not having invoices you can't have an aging report to know how far out or late a payment is. Also there will be cases were a check can go to pay more than one invoice and sometimes that might be partial payment. Not know which check is against which invoice makes bank reconciliation of accounts that AR effects a lot harder. Basically you are just asking for trouble and are going to make errors a lot. Itt really is going to be a lot harder to catch mistakes like apply a payment against a wrong account. This is bascily IT being lazy and trying to save money or the accounting system you bought not being correct designed in the first place. Spend the money up front because there is nothing more to tick off students than getting there accounts wrong because you have poor validation controls on student accounts. Trust me you will spend a lot less money in the long run doing it right verse having a work around that is a lot more prone to errors. So basically tell IT you can't dictate bad accounting practices to the accounting department because you probably will end up tracking all of this via an excel sheet when your accounting system should due this.