Accounting Treatment if there is 4 parties involved (as agent of Estate planning)

I appreciate if there is anyone can help me regarding the accounting treatment and know how to use on Manager Accounting.

Context:

  1. I am acecombat2 an agent for Estate Planning under business entity named ‘AST’ which involve with product called Will writing.

  2. The payment structure used by AST is commission based which every Wills I’ve done is 300$ and if I have recruits doing sales under my registered name with AST, I’m also received commission for each sales of will writing services done by my recruits of 50$. In case of recruit members’ commission is 300$ for every sales they have done. The wills service provided by AST is priced 1400$.

  3. Based on information above, If I doing the sales by myself I received 300$ for 1 sale, the rest 1100$ will be paid for the AST will writing service.

  4. If My recruits did 1 sale, I received 50$ commission, 300$ are payable to the recruits and the rest 1050$ goes to AST will writing service.

  5. There are 3 scenario in event of suceeded of 1 sale and the client pay in full. Recruits’ sales.

a. The client pays with cash via the recruits. (Normally I put the balance after commission in liabilities account before expense it off)
b. The client pays via bank facility of cheque/card payments to me acecombat2. (Normally I put the balance after commission in liabilities account before expense it off)
c. The client pays via bank facility of cheque/card payments to AST. (Normally I received Comission a week later)

Based on context above, How do I do the accounting treatment in manager accounting incase recruits does the sales?

Thank you in advance! :sweat_smile:

I don’t understand why you are posting anything to a liability account.

I don’t see the other than 300$ or 50$ as sales, do my understanding is wrong? Or how should I do it?
I’m new to this kind of situation that I’m heading to.

300$ is recruits’ sales comission (is a cost) to me, 50$ is my net sales comission on top of recruit’s sales.

1050$ I held temporary with me as I need to give it to AST if the payment are issued to my bank account. A liability before I expense it as cost to my sales until I bank in or pay in cash to AST.

But if its direct to AST, the AST owes me 350$.

The recruits does not have any official relation with AST, I Do and I also have relation with recruits.

The sales activity does continue even in weekend, so I’m thinking before even pay to AST, there is documents need to check before submitting. Then, there is delay that of the said process, no matter what I’m ended up have to post either liability or asset depending which payments come first or later. Sometimes client pays in installments or deposits.

Without going into a lot of detail, anything paid to you should be shown as income, no matter who it comes from. Commissions you pay to recruits are expenses. Amounts you pay to AST are expenses. Exactly how you characterize things may depend on the nature of your contractual agreement with AST. A local accountant is probably the best source of advice.

Thanks @tut.

You set up two BS Liability - Trust Accounts (a) AST Trust account & (b) Recruits Trust account.

When the client pays you, then the Receive Money transaction “as you hold the funds in trust” would be:
Line 1 - AST Trust account - $1050
Line 2 - Recruits Trust account - $300
Line 3 - P&L Income Commission - $50

Then when you pay AST or Recruits, then the Spend Money transaction would be (?) Trust Account. The payments to AST & Recruits don’t ever get expensed, they just get “cleared” through the Trust accounts

If you have a number of Recruits and want to track them individually, then set up the Recruits Trust account as a Custom Control Account with the account made up of Special Accounts.
Then under the Special Accounts tab create an account for each Recruit and have them allocated to the Recruits Trust control account.

PS: You have to activate the Special Accounts tab under Customise first.

No, they are collecting the 1400 on behalf of a third party, its not their income. They are only entitled to claim as income the commission being paid to them. No different to an insurance broker - they don’t claim the total premiums collected as income, its collected on behalf of the insurance company and held in trust until remitted.

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@brucanna Thank you so much! I’m gonna try it now.

I guess this will all depend, as I said earlier, on the contractual arrangement with AST. The model @Brucanna describes could be the right one. But AST could also be acting as a subcontractor to @acecombat2 in some situations and as an agent when collecting payment directly from end customers. In that case, the model I described would seem more suitable in my mind. Ultimately, whatever approach is used needs to product an accurate picture of net income.

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@Tut I’m gonna post my Chart of Account of why @Brucanna can tell accurately and understand the AST’s commission based payment structure.

@Tut I’m sorry if my earlier explanation of my relationship with AST is insufficient.

  1. AST can’t be my subcontractor because I’m using their service of will writing. They do the legal work.

  2. As I described about the payment structure which very similar to Insurance:

The payment structure used by AST is commission based which every Wills I’ve done is 300$ and if I have recruits doing sales under my registered name with AST, I’m also received commission for each sales of will writing services done by my recruits of 50$. In case of recruit members’ commission is 300$ for every sales they have done. The wills service provided by AST is priced 1400$.

  1. Why @Brucanna accurately distinct the Accounting treatment:

The client pays with cash via the recruits. (Normally I put the balance after commission in liabilities account before expense it off)
b. The client pays via bank facility of cheque/card payments to me acecombat2. (Normally I put the balance after commission in liabilities account before expense it off)
c. The client pays via bank facility of cheque/card payments to AST. (Normally I received Comission a week later)

  1. Further Clarification that affirm @Brucanna’s understanding:

I don’t see the other than 300$ or 50$ as sales, do my understanding is wrong? Or how should I do it?
I’m new to this kind of situation that I’m heading to.

300$ is recruits’ sales comission (is a cost) to me, 50$ is my net sales comission on top of recruit’s sales.

1050$ I held temporary with me as I need to give it to AST if the payment are issued to my bank account. A liability before I expense it as cost to my sales until I bank in or pay in cash to AST.

But if its direct to AST, the AST owes me 350$.

The recruits does not have any official relation with AST, I Do and I also have relation with recruits.

The sales activity does continue even in weekend, so I’m thinking before even pay to AST, there is documents need to check before submitting. Then, there is delay that of the said process, no matter what I’m ended up have to post either liability or asset depending which payments come first or later. Sometimes client pays in installments or deposits.

The mistake I did is using wrong terms, such as expense, recruits’ sales commission as cost and so on.

Now my next concern is how do I know the transaction is for that particular customer that myself or the recruits sold to? So that I can trace back when they come to update their wills or to buy other products that AST provides?

Since I didn’t use Sales Invoice how do I tag the customer information to all of transactions recorded, So that I can use the Customer Statements or History of purchases made.

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My suggestion would be - use the Sales Invoices. Set the clients up as Customers, create the Sales Invoice which would contain the same transaction breakdown as the Receive Money detailed above and then the actual Receive Money would have the Account (line 1) = Accounts Receivable + Customer + Invoice. This would seem to duplicate the required transactions but is the only way to achieve traceability & history.

When setting up the Customer you could use the code field to identify who the customer belongs to. If the recruit’s name is Silly Billy, then the code could be SB001, SB002 etc.

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Create in sales invoice same as received cash account, without the amount right?

Unless if want to record the amount. I just need to offset the amount by creating extra duplicate as the Received cash account but negative amount.

Then I need find another way to produce invoice and receipts for client’s reference by using spreadsheet or words office,

:sweat_smile:

or! if I’m like don’t mind having two different books, I just create another for customer records with proper sales invoice. while the previous one is for internal use only.

You could create zero value Sales Invoice, but what’s the point - no financial history.

No, create the Sales Invoices with all values,

Create the Receive Money to pay the Sales Invoice

Creating a separate Customer Record books just duplicates the work and is unnecessary. The one set can do it all.

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When I look again, this time @brucanna came up the same method like I did on the first attempt.

Since in no way I’m gonna use Sales Invoice print to the client’s I might have to create custom invoice using office word, or I try to sort it out with AST of whose Invoice the client should receive.

I have the feeling AST’s would be the relevant one since is a Trustee company and I’m just a subcontract.

Thank you @Brucanna and @tut, is a steep learning curve to me.

:grin:

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