## Principal vs. Agent: Revenue Recognition
When a transaction involves a Principal and an Agent, each recognises revenue differently:
| Party | Revenue Recognised |
|---|---|
| Principal | Gross amount of goods/services sold |
| Agent | Only the commission/fee earned |
### Who is the Principal?
The principal is the entity that is primarily responsible to fulfil the contract — bears inventory risk, sets prices, and delivers the product/service.
### Who is the Agent?
The agent only facilitates the transaction and earns a fee/commission — no inventory risk, no primary obligation to the customer.
### GST / Taxes
Amounts collected from customers and paid to the government (GST) are not revenue for either principal or agent.
### Common Examples
| Scenario | Principal | Agent |
|---|---|---|
| Food delivery (MCD via Zomato) | MCD | Zomato |
| Franchise coaching (AK Sid via Prince Franchise) | AK Sid | Prince Franchise |
| Insurance sold via bank | Insurance Company | Bank |