Consulting fee is the expense that company spends on consultant services related to expert services such as accounting, finance, marketing, and others. Consultants provide service which analyzes the data and provides expert opinions related to specific skills. After the consulting, they will provide the best recommendation for the problem that the company is facing.

In accounting, the company will record the consulting fees as the expense on the income statement. It is the service that company consumes when the consultant provided it. It cannot be capitalized as assets or any other accounts.

The consulting will not happen on regular basis, it depends on the company problem and the requirement from the management team to find the solution. It is hard to allocate the expense to a specific year, so we should record it based on the occurrence.

However, the consultant may prepare a contract that does not mention the total invoice bill. They prepare contracts with the cost charge per hour only. So the total invoice bill will depend on the time that consultant spends on the tasks. So by the time both parties prepare the contract, they are not sure about the total amount to be charged at the end of the work. They have to wait to the end to get the final figure.

The company has to record the consulting fees as the operating expense on the income statement. The recognition of expense will depend on the time of occurrence of the work perform.

The journal entry is debiting consulting expenses and credit accounts payable.

The entry will increase the expense on the income statement. At the same time, it will increase the accounts payable on the balance sheet which is the company obligation to settle with the consultant in the future.

On the due date, the company has to settle the balance with the consultant. The journal entry is debiting accounts payable and credit cash paid.

Company ABC is facing an issue related to the new accounting standard. The management team decide to hire a consultant to provide them the recommendation related to the adaptation of this new standard. The consultant has performed the work and charged ABC $ 10,000. Please prepare an accounting record for the consulting fees.

Company ABC hires a consultant to provide recommendations regarding to the new accounting standard. It is not the regular expense that company has to spend to acquire the contestant to provide the best solution. So we cannot allocate the expense to any period except the period that it happens.

The comapny should record the consulting fee as an expense on the income statement. The journal entry is debiting consulting expenses $ 10,000 and credit accounts payable $ 10,000.

When the company makes payment to the consultant, they will record debiting accounts payable $ 10,000 and credit cash $ 10,000.