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Hello and thank you for reading my post. I have a situation where I provided an advance for a company that will be co-developing products with my organization. The intention is that it will be paid back via royalty payments with additional benefits stemming from purchase discounts we will get for co-developed product that we sell.
The way I am looking at the accounting, every time I receive a royalty payment, I will debit cash and credit the advance until it is fully paid off. Then I will be able to take royalty revenue to my p&l.
Here is my question: the agreement says that I the advance will be paid off through a combination of royalties and purchase discounts. If the royalties in themselves are enough to pay off the advance, can I immediately take the purchase discounts and get the p&l benefit, or do I have to wait for the advance to be fully paid off before I can have anything hit my p&l?
The way I am looking at the accounting, every time I receive a royalty payment, I will debit cash and credit the advance until it is fully paid off. Then I will be able to take royalty revenue to my p&l.
Here is my question: the agreement says that I the advance will be paid off through a combination of royalties and purchase discounts. If the royalties in themselves are enough to pay off the advance, can I immediately take the purchase discounts and get the p&l benefit, or do I have to wait for the advance to be fully paid off before I can have anything hit my p&l?