I'm a total bookkeeping noob. My LLC has an agreement with another LLC where we split income coming from a particular source. As it happens the income comes to my business's bank account and then I send the other company's portion to them.

So let's say income of $1000 comes in.

$500 of this is income for my LLC and $500 is income for the other LLC. How would I record that in terms of bookkeeping? My company did not have income of $1000 and have a $500 expense. My company only made $500. When I run a report I want to see that my business has $500 of income not $1000 with a $500 expense.

But when I import bank transactions there is $1000 inflow and $500 outflow. How do I classify the $1000 inflow and the $500 outflow?

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    Calling it income in the first place is a misnomer. It's revenue. What's left over after you pay your expenses is what is called income. – Chris W. Rea May 29 '16 at 0:36
  • @ChrisW.Rea: although on a chart of accounts this would go to something like Income:Sales, no? Is this an inconsistency in nomenclature or are there two different concepts here? – User Jun 1 '16 at 0:48
  • Revenue is the top line, and income is the bottom line, i.e. revenue net of expenses. See here. Quoting part: "Revenue and income are often used interchangeably by the average person, but in an accounting or corporate governance context, these terms refer to very specific concepts that differ in important ways." – Chris W. Rea Jun 1 '16 at 1:12
  • @ChrisW.Rea I understand that, it's more a question of in some accounting software they use the term "income" but I guess this is to contrast with "expense" accounts. Wikipedia says "Revenue or income accounts represent the company's earnings and common examples include sales, service revenue and interest income." So if I understand correctly in accounting software, revenue will go to an income account? – User Jun 1 '16 at 2:09

My company did not have income of $1000 and have a $500 expense

Why not? Your company received $1000 from you, and based on its agreement with the other company - transferred out half of it. How does it not translate to having $1000 income and $500 expense?

When I run a report I want to see that my business has $500 of income not $1000 with a $500 expense

You can write in your reports whatever you want, but if you want to see the real picture, then that is exactly what you should be expecting.

That said, transferring money from yourself to your company is generally not considered income. You can have it booked as owner's equity, or a owner's loan if the company is required to repay.

Unless you're paying to your company for some services provided or assets transferred, that is.

  • Well the decision of which company physically receives the income was arbitrary. So it just have easily could have been the other company that received the $1000 and then send $500 to my company. So if I run a report I don't think I'd want to see that the revenue for the year was let's say $50k if it was actually $25k. Seems like this would give a skewed picture – User May 29 '16 at 14:09
  • Also my company did not receive a $1000 from me, it's from a third party. – User May 29 '16 at 14:11
  • Another perspective, all other things being equal, if someone were examining both companies to buy one they should appear as companies that make equal revenue. Not one company makes twice the revenue of the other. No? – User May 29 '16 at 14:23
  • @User Unless your customer pays both companies equally, then one will necessarily have twice the revenue of the other, no matter how you decide to pass things through. – Chris W. Rea May 29 '16 at 15:26
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    @User you said it was coming from your business account - so the company received it from you. I'm not sure you understand how accounting works. It doesn't matter how you made the decisions (it may matter for taxes/legal requirements/etc, but not for accounting). Accounting should reflect the actual situation on your accounts. If you don't understand exactly what's going on between your various companies - hire an accountant, or at least a competent bookkeeper, to help you. – littleadv May 30 '16 at 6:58

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