Accounting Programs

Hidden asked:


I’m in an MBA accounting program and I’m stuck on two parts of my report:

1)A Fitness club offers credits toward next year’s dues for new member referrals. Management estimates that these credits will amount to approximately 10% of revenues for the up-coming year. Revenues are now in the range of $2.5 million annually.
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I want to set up a contra revenue account for these predictable referral credits.

What double entries would I make to set up the revenue contra account and once a referral happens what does the double entry look like?

Or am I looking at this all wrong?

2) Salespeople at the fitness center are paid every three months based on sales for that quarter. An adjustment is made the next quarter to their commission representing a deduction for non-payment of fees from the previous quarter which they had received commission for.
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So basically right now I pay them in full for all commissions and then next quarter I deduct from each salesperson’s commission whatever commissions they received on memberships that are not honored or paid for by the customer.

In order to improve my working capital I want to set aside some of their commission to cover these fairly predictable non-payments and keep the money in my pockets until we know for sure that a membership is being honored.

How do I account for this in GAAP???

If anyone could help I’d be really grateful, I’ve been stuck on these two for a while and unable to find anything online that helps…

Jeffrey