USA Accounting of online platform

[PEPITA]

Hi all,

I have a client who is starting an online platform for renting tools. Users deposit money, rent the tool and the owner gets the money for that. How would you account the in/out of the money for the service?
It's an Asset/Liability transaction but what would be the exact accounts you would use?
Thank you!

 

[Taimur G]

Hi Pepita,

My understanding is that any deposit he gets if there is a possibility of returning that deposit then the following:

Dr Cash
Cr Deferred income (Liability)

When the deposit becomes actual sale then,

Dr Deferred income
Cr sales.

 

[PEPITA]

Hi Taimur,

Thank you very much replying!
I have two questions, if you would be so kind to answer:
1st - When money deposited are deposited to our bank account, can I do it Dr Bank/ Cr Deferred income?
2nd - The deposit which the 1st client gives us is the rent + the fee we get for using our platform and doing the transaction, then how would you change the second transaction? Only the fee is the actual sale, the rest of the amount goes to the owner of the tool.

 

[Shcoll]

Hi all,

I have a client who is starting an online platform for renting tools. Users deposit money, rent the tool and the owner gets the money for that. How would you account the in/out of the money for the service?
It's an Asset/Liability transaction but what would be the exact accounts you would use?
Thank you!
[/QUOT

Hi all,

I have a client who is starting an online platform for renting tools. Users deposit money, rent the tool and the owner gets the money for that. How would you account the in/out of the money for the service?
It's an Asset/Liability transaction but what would be the exact accounts you would use?
Thank you!

Dr. Cash
Cr. Deposit Liability Account
When the earning process is completed
Dr. Deposit Liability account
Cr. Rental Revenue Account

 

[Shcoll]

Dr. Cash and Credit Deposit Liability Account
And when the earning process is completed,
Debit Deposit Liability Account and Cr. Rental Revenue Account.

 

[PEPITA]

Thank you, Scholl,

for your answer.
Would you do the same transactions if the role of the platform is of a mediator, meaning that the platform is used only for transfering the money for the rent from the renter to the owner, and the revenue is the fee paid for doing the match between the renter and owner.

 

[Shcoll]

Everything based on when the revenue is recognized or recorded. It is when the contract is fulfilled. That is the material received, used returned and then the Liability Account is closed and revenue is Credited. If the person in charge is a manager for fee than what I said above is for the owner's books, the manager's fees will be debited to cash credited to revenue, the owner will credit cash and debit fees expense.