Need clarification on Accounting and invoicing

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Akhil Raj P

3 Points Joined May 2020

Hello Experts,

Need a clarification on revenue calculation and invoicing in an online model. The model is as below:

A - The person who wants to sell the product by utilizing online platform of "B"

B - The intermediary who owns the online platform and earns commission from "C" who is the buyer of product

C - Buyer of product

The product will not come into possession of "B" as "B" is only facilitating the sale via online platform. How is the revenue for "B" calculated ? The invoice to "C" is it Product Price + Commission or just commission ?

Hoping for some clarification

Replies (2)

yasaswi gomes

My grammar is 💯 good I

7296 Points Joined March 2019

Product cost 100₹, Commission 10₹. The revenue recognition model is slightly different here because, if A was the principal, he will sell the products directly to customer. But, A is using Agent B to make a sale and not paying commission. So the transaction price A sets is different from what B sets. Considering this, A is a wholesaler who sells at his own price and B add a margin and sells the product. Or A sets a margin on behalf of B.

In the books of A:

Cash a/c 100₹

To B a/c 100₹

In the books of B:

Commission received a/c 10₹

Cash a/c 100₹

Sales a/c 110

then he transfers the cash to A’s a/c

A a/c 100

To Bank a/c 100

In the books of C:

Purchases a/c 100₹