Incentive Fees Journal Entry

An Incentive Fees is a reward or incentive given to investment manager for managing the assets of a client’s business. It is also called Performance Fees as it is based upon the profits or positive returns gained in the utilization of the Assets of a client’s business.

From the point of view of our business, it is an Expense which is recorded in the Income Statement.

The journal entry to record Incentive Fees is shown below:

                                        Incentives Fees a/c   XXX

                                                                        Cash a/c / Bank a/c   XXX

                                                               (Incentives Fees Paid)

 

 

Is there is a difference between incentive fees and performance Fees?

No, In fact, there is no difference between incentive fees and performance fees as both terms are used to define the fees paid to investment manager for managing the investment of a client’s assets in order to gain positive returns on it.