Turnover

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Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2013 ONE OF MY CLIENT IS TOUR OPERATOR.HE GETS ADVANCE AMOUNT FROM HIS CUSTOMER AND FROM THAT AMOUNT HE ARRANGES FOR HIS TICKETS AND HOTEL AND OTHER FACILITIES.
IN THAT CASE WHAT WOULD BE THE TURNOVER OF MY CLIENT. THE AMOUNT HE RECEIVED AS ADVANCE FROM THE CUSTOMER OR THE REMAINING AMOUNT AFTER INCURRING ALL EXPENSES FOR THAT CUSTOMER WHICH IS THE PROFIT OF MY CLIENT.
PLEASE GUIDE WITH THE HELP OF SUITABLE DECISION IF ANY.
THANKS IN ADVANCE

CA Hardik Bunha

CA Hardik Bunha (Expert)
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12 January 2013 all money received from client is your turnover.

anurag

anurag (Expert)
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13 January 2013 which accounting method is being used, cash or accrual ?

Querist : Anonymous

Querist : Anonymous (Querist)

14 January 2013 accounting method used is mercantile

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Great question about **turnover recognition for a tour operator**!

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### Scenario:

* Tour operator receives **advance amount** from customers.
* Uses that money to pay for tickets, hotels, and other services.
* Wants to know: **What is turnover?**
Is it the **full amount received** from customer, or only the **profit (amount after expenses)?**

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### Answer:

**Turnover (Gross Receipts) for a Tour Operator = Full amount received from customers, including amounts collected on behalf of third parties (like airlines, hotels, transport).**

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### Explanation:

* The **amount received from customers** is your **gross revenue** or **turnover**.
* The **expenses incurred** to arrange services (tickets, hotels) are **costs** and are deducted later to calculate **net profit**.
* You do **not** reduce turnover by the expenses incurred.

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### Accounting Standards & Case Law:

* **Mercantile system (accrual basis):** Revenue is recognized when earned, not when profit is realized.
* The Supreme Court in **CIT vs. Hotel Blue Moon (1981)** held that turnover includes all amounts received from customers, even if part of it is passed on to third parties.
* Similarly, in service industries like tour operators, the gross amount charged to customer is the turnover for tax/accounting purposes.

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### Summary Table:

| Amount | Treatment |
| ---------------------------------------------- | ----------------------------------------- |
| Advance/Full amount received | **Turnover / Gross Receipts** |
| Amount paid to third parties (tickets, hotels) | **Expenses (not deducted from turnover)** |
| Profit (difference) | **Net profit** |

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If you want, I can help you with sample entries or turnover calculation format for your client. Would that help?

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