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-   -   When to record an expense (https://www.askmehelpdesk.com/showthread.php?t=760816)

  • Jul 31, 2013, 08:57 PM
    ack33
    When to record an expense
    I have a website which allows users to pay in advance for credits ($1 = 1 credit). They can then use these credits to purchase digital items on the website at a later date, almost like a gift card.

    My payment processor, who handles the transactions related to the purchase of credits, deducts a 15% fee from every credit purchased. Then they send me a check at a later date minus the 15% fee.

    Currently I record this as follows:

    -----When credits are purchased:
    Accounts Receivable - Payment Processor $17 (dr.)
    Payment Processor Commission Expense $3 (dr.)
    Unearned Revenue $20 (cr.)

    -----When credits are redeemed
    Unearned Revenue $20 (dr.)
    Sales $20 (cr.)

    -----When I receive a check from the payment processor
    Cash $17 (dr.)
    Accounts Receivable - Payment Processor $17 (cr.)


    So my question is regarding Payment Processor Commission Expense. Should this be expensed where I have it or when the actual sale happens? The actual sale (redemption of credits) could occur months after the credits have been purchased and months after I've already received a check from the payment processor.
  • Aug 1, 2013, 09:13 AM
    pready
    You can record the commission expense as a Prepaid Commission Expense (a current asset), then when the commission is earned the entry will be: Debit Commission Expense and Credit Prepaid Commission Expense for the amount of commission earned.

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