I am working with an architect who has been filling for permits on behalf of his clients. When they pay him for renderings they include the cost for permits and filings fees. I have been categorizing these payments as permits, but I want to make sure that is the correct method. I feel that because he is not filing for the permit for his business that is the incorrect category.
If you mark the filing fee paid as an expense then the customer payment of that fee is company income. On the P&L income is reduced by expense
if you create an asset account called fees-due and use than when paying the fee for the client, then when it is paid to your company, you post the payment to the fees-due account to zero that entry out. This part of the transaction does not hit the P&L, but the effect on the bottom line is the same as the first option.
My preference is to use the asset account scenario