Question

You are an accountant working for Hotel Co. Your supervisor has asked you to research what amount of revenue Hotel Co. should recognize for transactions booked by customers on Expedia. Expedia generally collects the full transaction price from the customer, then withholds a small fee (say, $10) from each transaction and remits the balance to Hotel Co. Should Hotel Co. record the gross transaction fee or only the net amount it receives from Expedia

Answer 1

Answer:

Hotel Co. should record the gross transaction fee and not only the net amount it receives from Expedia.

Explanation:

The revenue that Hotel Co. should account for in its books includes the gross transaction fee, while the collection expense that is withheld by Expedia is recorded as an expense or cost.  This method ensures that the revenue due to the Hotel Co. is actually accounted for while the collection expense by Expedia is also separately accounted for.  This will enable comparison with another hotel that does not use Expedia for its collection, for example.