Income from business alliance agreement

We are in preschool franchising business. Recently we have signed a Business Alliance Agreement with an institution who will generate business prospects for us. In turn if there is any prospect finally takes our franchise, then a percentage of Franchise Fee will be shared with that institution. More over the institution will also be responsible to look after centre support activities of such franchise centre(s) which is/are converted from their reference/lead.

We have given non exclusive territory right to such institution and received amt of Rs. 50,000/-as Business Alliance Agreement Fee from such institution, which is non refundable for the tenure of 5 years.

My question is that how could we recognise such receipt of Rs. 50,000/- and reflect that transaction  in our books of a/cs?

Replies (1)

Hi

Transaction is in the nature of long term borrowings to be recovered after 5 years. This is a deposit (secured or unsecured depending upon the terms).

 

For any further query PM or mail us.

anubhavjain @ ajhco.in

AJH & CO

Chartered Accountants

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