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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 482
Experience:  Former IRS Revenue Agent
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Have a question .- i have an insurance office and i use XERO

Customer Question

Have a question .- i have an insurance office and i use XERO accounting software for my bookkeeping business my question is that if i take cash payments from customers everyday from his monthly premiums i know that i have to deposit that money on the bank the next day on the insurance business checking account because the insurance company will draft the money from my account ,so where do i need to allocate each transaction and how, i meanINSURANCE COMMISSION REVENUE.- WHERE ? other income , other revenue or salesinsurance payments taking from customers .- where ? insurance account or whereinsurance refunds ?or i just to put everything on , the insurance that is listed as an expenseplease advise
Submitted: 8 months ago.
Category: Finance
Expert:  Dr. Fiona Chen replied 8 months ago.

Hello! My name is***** to JustAnswer. I'm reviewing your question now, and will post back with your reply momentarily.

Customer: replied 8 months ago.
Got it thanks
Expert:  Dr. Fiona Chen replied 8 months ago.

Dear Customer,

It depends on when you book (register) the customer's premium payment promised made to you. I am assuming that in your business you have to use the accrual basis. That is when you signed a contract and expecting a payment, you already have to recognize income. I will address to each account later.

For example, if you sign up a client, and his/her premium payment will be 1200. Then you book Dr., i.e., Debit Accounts Receivable, and Cr. i.e., Credit, Sales. Then, when he pays, you Dr. Cash and Cr. the Accounts Receivable.

Your insurance commission revenue account should not be used for 100% of the sales.

When your upper insurance company sends you cash, you register Dr. Bank to increase cash and Cr. Insurance Commission Revenue.

If the upper insurance company just leaves you some money and take some out, when you register income, put Dr. Accounts Receivable, Cr. Sales (the portion the insurance company takes) and Cr. Insurance Commission Revenue (the portion will be left for you).

Anyway, you need to retain an accountant and CPA to do the booking and returns for you. You need to spend your valuable time to develop clientele base and help your employees to develop their sales. Hire a general office manager to do the bookkeeping as well as other reporting requirement or answering phone calls. You have thousands of documents to handle and need help, too.

INSURANCE COMMISSION REVENUE.- WHERE ? other income , other revenue or sales

1) Other income and other revenue accounts mean income without relationship with your major income, insurance. Say, if you happened to have sold newspaper in your location for 200 that month, that is other income and other revenue.

2) Sales account is important. That is your general sales. So, under sales, if your revenue is relatively large, you want to separate it to possibly car insurance, property insurance, then by client's name. If you usually have clients with multiple insurance types.

3) Insurance commission revenue, you want to make sure that there is no double counting with sales. Use one of the two methods discussed above.

insurance payments taking from customers .- where ? insurance account or where

1) Your software seems to be general in nature. Can you find from your upper insurance company to see whether they have a software that is pertain to the industry?

2) Payment form customer will touch the cash/bank account.

It is assets change form, from accounts payable to cash.

Insurance refunds ?

Insurance Refunds -- if that is a refund to the customer, it is a contra account to sales and will reduce your sales.
or i just to put everything on , the insurance that is listed as an expense

Cool down. You know this is not the way to go. Expenses are such as office rent, office supplies expenses, wages, employee benefits, etc.

Should you have any further questions, I will offer premium service. Otherwise, a rating of 5 is appreciated.

Regards,

Fiona

Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP