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An application I'm building has a simplistic double-entry accounting component to it to keep track of funds passed owed to various parties. I'm unclear on how certain entries should be applied. Take the following example:

  • A soccer referee works a game and earns $50 from the league
  • He then fails to submit a game report within the time limit and is assessed a $10 late fee.
  • The referee should have a total of $40 owed to him.

From the referee's perspective, should both of those transactions affect his Sales and AR accounts?

  • $50 CREDIT to Sales account
  • $50 DEBIT to AR account
  • $10 DEBIT to Sales account
  • $10 CREDIT to AR account

Or would the first be Sales/AR and the other be Expenses/AP?

  • $50 CREDIT to Sales account
  • $50 DEBIT to AR account
  • $10 DEBIT to Expenses account
  • $10 CREDIT to AP account

Or should it be something else completely?

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The actual "sale" in this case was for $50, so you should credit the full $50 to the Sales Account.

To balance this entry you would make two opposite postings. A $10 debit to the expenses account and a $40 debit to Accounts Receivable.

This ensures the full $50 payment is balanced on both sides, whilst only $40 is expected to be received. The $10 is filed as an expense.

You seem to be trying to split this up into two transactions, each with only a single debit and a single credit. Whilst there's nothing wrong with that, you would end up with two Sales credits, one for $40 and the other for $10 - which doesn't really reflect what happened.

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  • Yes, of coures the "sale" is $50. My mistake, I'll update the question. Thanks for your help!
    – Tauren
    Commented Jan 4, 2013 at 4:27

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