So today I was trying to figure out how to do some double-entry bookkeeping for one of my projects. The service is similar to a bank teller - it accepts money on one end, charges some fees, and gives customer money in a digital format on the other end.
When the money comes in, say $10, we write an entry for it:
- We got $10 in assets (cash), we increase our liabilities by $10 (we owe the customer the $10 in a digital format). Both sides add up.
Then, when we process the money, we want to divide it in three parts - what the customer gets, what we pay for processing the transaction (cost of debiting the customer), and what we earn. In standard format, we would have:
On one side:
- our liabilities decrease by $10 (we process the transaction)
On the other side:
- we give $9.8 of the digital money to the user (our assets decrease)
- we earn $0.1 in fees we charge the user (our income increases)
And we aren't sure if we should be putting the built-in fees on the first side, or on the other side. If we go with the first option, it's following the convention, but we get $10.1 on one side and $9.9 on the other side - not good. If we put it on the other side, both of the sides balance, but we break the convention of where an expense should be put.
How should we be balancing this entry?