Reporting on Event Bookings and Rentals

This article covers reporting on event bookings and rentals.  The examples in this article use event bookings, but the concepts for rentals are the same, so if you are reading this article for rentals, you can substitute the word "rentals" every time you see "event bookings."  The executive summary is first, and a deeper dive follows.

Executive Summary

Event bookings have unique characteristics that make reporting on events and accounting for events a bit trickier than reporting for selling products.  Here are some examples of the nuances:

1. Events are typically booked days, weeks, or months before they occur.
2. The make up of an event can change over time - even after the event occurs (ie.  you can add or remove event attendees; add or remove root beer, pizza, or pinatas; change the start date or duration of the event, etc.)
3. Events can have more than one payment on one or more different days.  

Basic Notes and Definitions

The general ledger accounts/accounting codes in Aluvii are customizable.  The names and descriptions can be changed at any time.

By default, the accounting code for all payments towards events is "Aluvii-DeferredSales-Events."  It doesn't matter whether the payment was taken as a deposit, taken before the event occurred, while the event was occurring, or after the event occurred.  

 As of the end date time of the event (the day and time the event is scheduled to end), the entire amount of the event booking including sales taxes, tips, the assignment, upsells, etc. is shown under the accounting code called "Aluvii-EarnedSales-Events."  So, Aluvii-EarnedSales-Events is the entire amount due of an event that has been earned.

If you don't care to understand all of they whys behind it all and just want to know how to book your journal entry, follow these steps

Cash Basis Accounting Method Journal Entry (Revenue Recognized when Payment is Received)

1. Create a new general ledger account in your accounting software.  Designate the account as an Income Statement account.  Designate the account as a revenue type.  Call it "Unallocated Event Revenue" (this account is payments you've received towards events, but the event has not yet occurred, so you're not sure how the revenue will be classified - you don't know yet if it's party room rental revenue, food revenue, beverage revenue, decorations revenue, etc.)
2. When you see "Aluvii-DeferredSales-Events" in a report, type the corresponding amount in your newly created general ledger account as a credit amount.
3. When you see "Aluvii-EarnedSales-Events" in a report, type the corresponding amount in your newly created general ledger account as a debit amount.
4. When you pull your profit and loss or income statement report in your accounting software, your Unallocated Event Revenue will either be a positive number, a negative number, or a zero:
   1. Positive - If the revenue line item for Unallocated Event Revenue is positive, that means that, for the date range of the report, you have received more in payments toward events than money you have earned from actually carrying out events.  It's okay to book it as revenue, because you recognize revenue when the payment is received.  You just don't know what kind of revenue it is quite yet. 
   2. Negative - If your Unallocated Event Revenue general ledger account has a negative number, that means that you have fulfilled more events than you have received payment for.  Because you recognize revenue when you receive the payment, this amount will act to subtract from your total revenue for now until you receive the payment at a later date.
   3. Zero - If your Unallocated Event Revenue general ledger account is zero, that means that you have collected the same amount in payments as parties you've already fulfilled.  

Accrual Basis Accounting Method Journal Entry (Revenue Recognized when Payment is Received)

1. Create a new general ledger account in your accounting software.  Designate the account as a Balance Sheet account.  Designate the account as a liability type.  Call it "Unearned Event Revenue" (this account is payments you've received towards events, but the event has not yet occurred, so you're not sure how the revenue will be classified - you don't know yet if it's party room rental revenue, food revenue, beverage revenue, decorations revenue, etc.)
2. When you see "Aluvii-DeferredSales-Events" in a report, type the corresponding amount in your newly created general ledger account as a credit amount.
3. When you see "Aluvii-EarnedSales-Events" in a report, type the corresponding amount in your newly created general ledger account as a debit amount.
4. When you pull your balance sheet report in your accounting software, your Unearned Event Revenue will either be a positive number, a negative number, or a zero:
   1. Positive - If Unearned Event Revenue is positive, that means that you have a liability to your customers, because you have collected more in payments towards events than the amount in events you have fulfilled or earned.
   2. Negative - If your Unearned Event Revenue is negative, that means that you have fulfilled and earned more in events than you have received payment for.  You have a net receivable from your clients.  
   3. Zero - If your Unearned Event Revenue is zero, that means that you have collected the same amount in payments as parties you've already fulfilled.  

Detailed Explanation

It is recommended that you watch this video as an overview to the process.  Below is companion information to the video with screenshots and further detail:

Typical Point of Sale Scenario

There are two characteristics of a typical point of sale scenario.  At checkout:

1. We have a finalized shopping cart
2. We pay for the shopping cart in full.

The journal entry is simple.  There are credits to revenue and sales tax payable and debits for the payments received.

Event Booking Scenario

Let's contrast a typical point of sale transaction with an event booking transaction to summarize why it's a bit more complicated.  At checkout:

1. We do NOT have a finalized shopping cart (an additional pizza, more or less attendees, or a balloon tying clown could be added to the event booking at any time, including after the event takes place).
2. We do NOT pay for the shopping cart in full (there is typically a deposit followed by one or more subsequent payments).

Classifying the Revenue

Let's assume the shopping cart below and a $100 deposit is taken at time of booking.  To which revenue general ledger accounts do we book the $100?  Was the $100 for the party room, the pizza, the attendees, or the sales tax?

Once the event has occurred and the shopping cart is finalized, we can classify the revenue.  

More on Aluvii-DeferredSales-Events and Aluvii-EarnedSales-Events

Aluvii-DeferredSales-Events and Aluvii-EarnedSales-Events are complementary balance sheet accounts.  Imagine you had a general ledger account called "Accounts Receivable/(Unearned Event Revenue)."  Imagine that general ledger account in a T-Chart in a classic general ledger. 

1. The debit side of that T-Chart would be Aluvii-DeferredSales-Events.  It represents the event revenue that has been earned - the accounts receivable (or reduction to Unearned Event Revenue).
2. The credit side of that T-Chart would be Aluvii-EarnedSales-Events.  It represents the payments received toward events - the reduction to accounts receivable (or Unearned Event Revenue). 
3. Balance sheet accounts always start at the beginning of time and go through a certain date.  The sum of all debits minus the sum of all credits is the balance.  If the balance is a credit balance in the T-Chart you'd have an accounts receivable balance (you are owed more for events than you have earned).  If the balance is a debit balance in the T-Chart you'd have unearned event revenue (you have been paid more for events than you've earned).

Effects of Cancelled Events / Rentals

Cancellations without Refund

Note:  in order to avoid the "orphaned Deferred Sales - Events" scenario (a deposit that will never be recognized as earned revenue) described in this section, it is recommended that cancellations without refunds never be performed, and instead, handled as described in this article.

Assume a $250 event with a $17.50 sales tax booked on June 11 with a $125 deposit paid by credit card and the event scheduled to take place on June 17th. Then, the event is cancelled on June 14th without refunding the deposit:

At time of booking/deposit on June 11th:

June 11th
Debit: Credit Cards: $125
Credit:  Deferred Sales - Events:  $125

June 17th
Credit: Event Revenue Accounting Code(s): $250 + Sales Tax $17.50
Debit:  Earned Sales - Events: $267.50

At time of cancellation on June 14th:

June 11th:  No change to above

June 14th: No activity on the reports at all, because no payment was refunded

June 17th
Credit: event revenue accounting code(s): it is gone as if it never existed
Debit:  earned sales - Events: it is gone as if it never existed

Cancellations with Refund

Assume a $250 event with a $17.50 sales tax booked on June 11 with a $125 deposit paid by credit card and the event scheduled to take place on June 17th. Then, the event is cancelled on June 14th with refunding the deposit:

At time of booking/deposit on June 11th:

June 11th
Debit: Credit Cards: $125
Credit:  Deferred Sales - Events:  $125

June 17th
Debit: Event Revenue Accounting Code(s): $250 + Sales Tax $17.50
Credit:  Earned Sales - Events: $267.50

At time of cancellation with refund on June 14th:

June 11th:  No change to above

June 14th: 

Debit: Credit Cards: -$125

Credit: Deferred Sales - Events: -$125

June 17th
Debit: event revenue accounting code(s): it is gone as if it never existed
Credit:  earned sales - Events: it is gone as if it never existed