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Revenue Collected on Behalf of Another Company - GST Treatment?

Matt Richard's Profile

We are receiving Revenue on behalf of another company, we have created a line in the Balance Sheet to capture all the revenue collected on behalf of a sister company.

Since we upload our bank statement through our accounting system, we need to create an invoice or receive money transaction to reconcile with the amount received on the bank statement. Note revenue collected on behalf of sister company is inclusive of GST. The reimbursement of this revenue to the sister company is normally done at month end and there are no fees charged for this service.

When receiving payment how should we account for the GST portion of the revenue received on behalf of sister company, should we just have it a Non GST?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Who owes the GST? You or the sister company?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Are you receiving Revenue or are you receiving a customer payment for an invoice issued by your sister company? Who owned and delivered the services/goods? Who carries the AR?

There is a clear transaction entry difference between these scenarios.

For example, shared service offices may often receive customer payments, and then credit out the payments to the relevant operating companies.

Ade Onasanya
Title: Portfolio Accountant
Company: Madison Marquette
(Portfolio Accountant, Madison Marquette) |

In the absence of any thought out policy or policy guideline within the organization or group, the accounting system will have to adopt what is more appropriate for the circumstance in the meantime and quickly move to formalize or normalize the development depending on the frequency of the such occurrence.

Flowing from Len Green submission, I would ask the following questions in addition to Len position: Is this Revenue a related party transaction or it is an arm's length transaction. ? In any case I would record the Revenue as a liability to parties identified in the nature of the transaction- Related Party or Third party Customers/suppliers and record the cash categoried under restrictive cash not available for operations,

Anonymous
(Managing Partner) |

Is this an agency relationship? I would record revenue collected as a liability. You may want to reclass cash collection, as "restricted." Are you collecting a percentage commission for these transactions?

I would encourage a new foot note disclosure, in your companies notes, if you are an SEC registrant. You want to be transparent with your companies shareholders.

Gil Rinas CPA, CGA
Title: Finance Manager
Company: New Peaks / Success Resources America
(Finance Manager, New Peaks / Success Resources America) |

If you are talking about Canadian GST, the GST is due from the invoicing company to the Canada Revenue Agency based on their GST reporting schedule regardless when this is paid or collected. Their invoices presumably show their GST number and the amount of GST charged.
It is a bit unclear why you would be depositing payments due for/issued to another company/legal entity (or if you are invoicing for this revenue). That concern aside, I would see you would record this as a debit to your bank and credit to an intercompany liability account for the entire amount as any GST due is on the books of the other company, assuming they invoiced the customer.

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