How to Record Cost Recoveries

by Owner, Bookkeeper

What does GAAP say?

What does GAAP say?

I have a consulting client who prepays for training workshops for his clients. He is charged by the training institute then he turns around and charges his clients (as a recovery) for the cost of the training.

He does not charge an administration fee for doing so. It turns out to be a wash; total billing for training (expense) is recovered by invoicing his clients back. He does not take the training himself.

Do I post this as a payable to the training institute then put the revenue he receives from his clients as a cost recovery, against the expense to net zero? Rather than having the revenue viewed as revenue?

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I'm not sure where you are located but as far as I know, generally accepted accounting principles state that cost recoveries should not be netted against expense but recorded as revenue.

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

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