Rolling Reserve Question

Yes that reserve, the hold back, is part of your income, you report it as of the date it is paid to the processor. he is just acting as your agent for the transaction. But the income is booked when you enter the sale at the full price

the hold back is just where it is located, not any different then if you split a deposit between two bank accounts. And when he does pay it to you, it is just moving where the money is, a transfer as it were, it is not additional income.

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@EBFinancials wrote:

A processor keeps 10% of the processed funds in a rolling reserve account.
It means that there is always 10% of the received payments in a special side account at the processor's end, that is not yet released to my bank account.

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Given that the funds are not yet released to your bank account, you have not received the money.  "Reserve account" is the debtor's own internal definition and does not mean you have received the money. You do not control it or have access to it.  

If true, there is no payment transaction to record for the 10%, and so on the cash basis, this is not income.

On the accrual basis, the income was created when client was charged for the service.

I'm a bit confused in light of what @Malcolm Ziman wrote in his reply to my question.
What you explain applies in both reporting methods cash and accrual?
The logic says it applies only in accrual basis. Please advise.

Also, on the same matter, I forgot to mention that during those 180 when the funds were held with the processor, it deducted some amounts off it due to chargebacks that arrived during this time.
So eventually the amount that was settled to the bank was lower than the original one that had been placed on hold. How do I treat those deductions bookkeeping-wise in the scope of your explanation?

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@EBFinancials wrote:

What you explain applies in both reporting methods cash and accrual?
The logic says it applies only in accrual basis. Please advise.

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Income can be recognized at the occurrence of one of two events: 1) when service is provided (accrual method) or 2) when payment is received (cash method).  It's quite clear when these events happen. There is no overlap or ambiguity here.  You can run reports using either method. Accrual method uses the Invoice (or Credit Memo) date. Cash method uses the Receive Payment date

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it deducted some amounts off it due to chargebacks 

That's a Credit Memo type transaction (a negative invoice)

Hi,

I have the same concern regarding this rolling reserve. But the thing is, the processor will first deposit the full sales amount into the company's bank account and then debit the 10% from the same bank account after. So in the bank account i will see a (example) $100 Deposit  and a $10 Expense from the processor. 

My question is. Is it correct that I record the $10 as an Account Receivable from my processor? if not, how should i treat this?

I appreciate any feedback. Thank you