Tuesday, December 4, 2018

How to Recognize a Fee or Expense in the Invoice or Cash Sale

As an alternate solution, create an Other Charge Item for Sale for the reseller fee expense and choose an expense account as the default income account in the item record setup. Create an invoice adding the reseller fee expense item in negative amount so that the entry that will be created will be a debit to AR for $5,500, debit to Expense for $4,500 and a credit to Sales for the whole amount of $10,00.

 

Below are the steps on how to create the item and how to record it as expense in the invoice:

 

A. How to create the Reseller Fee Expense Item:

 

1. Navigate to Lists > Accounting > Items > New

 

2. Choose Other Charge for Sale as the Item Type

 

3. Enter the following information:

 

  a. Name of the item (ex. Reseller Fee Expense)

 

  b. Check box for Display in Website for the item to be available in the website

 

  c. Under Basic tab > Income Account = choose the appropriate Expense account and define an item defined cost and Unit Types if necessary

 

  d. Under Pricing tab > enter a base price for item (this is editable during invoicing)

 

4. Save the item. This is not an inventory item so no item tracking will be created and will not affect any inventory valuation

 

B. Create the invoice using the item

 

  a. Under Items tab, aside from adding the inventory item, add the Referral Fee Expense item in the last row.

 

  b. Choose Price Level = Custom and in the Unit Price/Rate column, enter the referral fee expense amount in negative values so that the total invoice to be paid by the customer is the total amount of the item/s less referral fee (ex. $4,500)

 

  c. After entering necessary information, save the invoice. Total Invoice amount should be $5,500

 

  d. Check the GL Impact to verify the entries under More Actions > GL Impact. Its entries should be as follows:

 

     Dr. Account Receivable $5,500

 

     Dr. Expense $4,500

 

              Cr. Sales $10,000

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