How to recognise commission received

[Tan Chun Huat]

Hi,

I would like to check how do i present my commission received(e.g. $500) as my revenue in P&L.

I also need to account for a processing fee charged ($50) by merchant relating to the commission received.

Do i present it as follows r i need to regross to $550:

Revenue (Commission) $500
Less: COGS (Processing Fee) ($50)
Gross Profit $450

 

[Steve-LevelUp]

You can only record the cash that you receive. So, if you receive $450 (do they take the processing fee?) then you can record the cash received. You cannot gross up a receipt, even if the fee is legitimate.

 

[Tan Chun Huat]

You can only record the cash that you receive. So, if you receive $450 (do they take the processing fee?) then you can record the cash received. You cannot gross up a receipt, even if the fee is legitimate.

Hi,

How about the following case?

An e-commerce platform for buyers and sellers to transact. Buyer will pay the total amount which comprises of cost of item, shipping fee, merchant fee and commission (my revenue).

Merchant will collect amount on behalf and remit to us net of the merchant fee they are entitled to.

Amount collected will be paid to seller net of my commission.

How can I perform the entries?

 

[Steve-LevelUp]

I would credit the full amount received to revenue, then book the cost of the sales related to that revenue.
Dr. Cash
Cr. Revenue

Dr. COGS
Dr. Shipping
Cr. Cash

This is how I think it would be done at least.

 

[Tan Chun Huat]

Hi,

I cant recognise the full amount received per IFRS as only commission portion is my revenue, the remaining is what i collected on behalf of the seller as they are using my online platform for selling their products.

So in my case, i am an agent. Will you be able to advise?

 

[Steve-LevelUp]

Take a look at Amazon.com published financial statements, and see what they do for their reporting. Given you receive the money and need to pay it out, you should be able to recognize it as revenue. You are on the hook for chargebacks and other issues and you hold the relationship with the customer, so you can record this as revenue. However, this revenue would need to be categorized separately.