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Kindly explain the concept of Acting as an agent
CFA
Pg no 15 of schwesernotes book3 (Reading 30) I didn't understand the example
Answers (6)
An agent is a person who acts on behalf of another person and earns by way of commission. For e.g. imagine that you want to sell a flat you own, you typically approach a broker/agent who acts on behalf of you and finds a buyer. In return you give a commission to the broker/agent. Let say the value of flat is Rs. 50 lakhs, the commission is 1% around Rs. 50,000/-. The revenue the broker/agent earned by facilitating the transaction is around Rs. 50,000/- not Rs. 50 lakhs. In the example given in the book the travel agent is booking the tickets on behalf of a customer from an airlines, the primary responsibility of the travel is with the airline and the agent is just a facilitator. So, the commission of around $1,000/- out of $10,000/- is their revenue and $9,000 is passed through to the airlines.
R Yashwanth Kumar
Revenue will be considered are 10k$ because Commission is charged separately to p&l
So sales 10k cr in trading and commission of 1k in dr of p/l right?
Thread Starter
Dhakshana DhakshanaSo sales 10k cr in trading and commission of 1k in dr of p/l right?
Under IFRS/US GAAP, there is no separation of P&L into trading account and P&L. It is a single unit. At most companies can present gross revenue and net revenue including pass through costs in between. In case of an agent, commission will constitute revenue.
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