How to Record AV Equipment Hire Revenue and Cost When the Hotel Sources Equipment from a Third-Party Vendor
Recording gross revenue and gross cost when the hotel acts as principal in arranging third-party AV equipment for a client event.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| City Ledger (Receivable) | Asset (+) | 500.00 | - |
| MICE Revenue: AV Hire | Revenue (+) | - | 500.00 |
| Cost of Sales: AV Vendor | Expense (+) | 400.00 | - |
| Accounts Payable: AV Vendor | Liability (+) | - | 400.00 |
💡 Accountant's Note
The hotel acts as a principal here, marking up the service. Gross revenue and gross cost must be shown to track the margin on third-party services.
Practitioner & Systems Framework
💻 ERP Architecture
When the hotel sources AV equipment from an external vendor and charges the client a marked-up price, the hotel is acting as principal (it controls the service before providing it to the client). Present gross revenue and gross cost — not net commission. The AV margin (JOD 100 in this case) is the hotel's value-add for sourcing and managing the vendor. If the hotel simply refers the client directly to the AV vendor without any control or risk, it may be acting as agent — only the referral fee would be revenue.
⚠️ Audit Flags
Auditors apply the IFRS 15 principal vs. agent test: does the hotel control the AV service before providing it to the client? Key indicators of principal: hotel is responsible if the AV fails, hotel negotiates price with the vendor, hotel bears inventory risk. If the hotel is an agent (merely connects the client to the vendor), only the referral/commission is revenue. The gross vs. net presentation significantly affects reported revenue.
📄 Required Documentation
Client event contract (AV equipment charges), AV vendor quote and invoice, hotel mark-up calculation, IFRS 15 principal vs. agent assessment, gross revenue and gross cost recording in MICE Revenue and Cost of Sales, City Ledger billing to client, and Accounts Payable to AV vendor.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.