Been awhile since I've actually done actual entries, and something is eluding me in getting a chart of accounts established for a new business.
The company is membership based, with commissions paid on referrals. The referer can opt to receive $500 in cash, or a combo of $400 cash and $100 gas card. The gas cards are not directly sold, so I'm not sure whether they should be treated as inventory. Specifically, I'm missing an entry or a debit to an entry as evidenced below:
To record the collected sale, and resultant payable to the referer: Cash 795 Referral Revenue 795 Commission Expense 500 Commissions Payable 500
When the commission is paid: Commissions Payable 500 Cash 400 Gas Card 100
So... where is the expense associated with (for lack of a better term) "disposition" of the gas card? Regardless of whether it's treated as supplies or inventory, there's going to be an expense for its cost somewhere (either COGS or Supplies Expense). Can't put it with the first entry, because the card hasn't been "used" as payment yet, so would the second look something like:
Commissions Payable 500 COGS 100 Cash 400 Gas Card 100 Commission Expense 100
Seems kind of weird to "reclassify" some of the commission expense, even though it all comes out in the wash on the Income Statement (and tax forms).
I'm sure it's something simple, but I can't quite find what feels like the "correct" solution. Any ideas on the entry, as well as whether the cards should be treated as supplies or inventory (or does that REALLY even matter)?
Thanks, Holly