I'm a little confused as to how to model this in the client accounting forecasts. This is for a MI pack and not for any statutory accounts.
Basically, the client receives 5% of the purchase price for a building in exchange for a contract agreement to supply that building with goods, and to charge an increased price on those supplies to approximately recoup the 5% given.
I presume once the cash is received a liability is raised, but how is this reduced?
Each time supplies are paid for would it just be: Dr Expense Dr Liability, Cr Cash/TP?
I believe the amounts supplied will vary, as will the price. Also, what if the total amount paid back is over or under the amount received? Is that classed as a sort of interest expense/income respectively?
How would this be treated under FRS 102?
Any thoughts/help much appreciated.