xyz limited is a sales and marketing company in amusement and enteainment domain 1 negotiates and agrees in advance with four mous amusement parks to purchase thei tickets for online sale dough its payment gateway to general public the negotiated

Question

xyz limited is a sales and marketing company in amusement and enteainment domain 1 negotiates and agrees in advance with four mous amusement parks to purchase thei tickets for online sale dough its payment gateway to general public the negotiated ates are a discount when compared with the ric of tickets sold ditty by amusement parks 10 the general public xyz limited is fre to determine its sal price ofthe ticket as pet of the agreement xyz limited will sso assis the amusement parks general public with respect to services provided by the amusement parks 10 the genera public however cach amusement pack will cntinge 0 be responsible for fulfilling its their obligation associated with the ike including solutions to dissalfied customers for xyz limited thee is 10 credit risk as payment is collected fiom customers before hand however i caries an inventory risk a tickets have to be purchased in advance and unsold tickets are loss to xyz limited discuss whether xyz limited is a principal or an agent

Dawn Donaldson · Answer

The problem requires an analysis of whether XYZ Limited is acting as a principal or as an agent in the context of selling tickets for amusement parks.

Let’s break down the details provided:

Sales and Marketing Company: XYZ Limited is operating in the amusement and entertainment domain.
Role in Ticket Sale: It purchases tickets from amusement parks at a discount and sells them online to the general public through its payment gateway.
Pricing Freedom: XYZ Limited is free to set the sale price of the tickets.
Agreement Details:
- XYZ Limited assists the amusement parks/general public with respect to services provided by parks.
- Amusement parks are responsible for fulfilling obligations related to the ticket, including handling dissatisfied customers.
- Payments are collected by XYZ Limited from the customers.
- XYZ Limited carries the inventory risk for unsold tickets (i.e., it purchases tickets in advance, which may result in losses if not sold).

Understanding Principal vs. Agent

In accounting and business contexts:

Principal: A principal acts as the primary party in a transaction. They have control over goods or services provided, set prices, and bear the related risks (inventory, credit risk, etc.).
Agent: An agent acts on behalf of another party (the principal) and earns a commission or fee. Agents typically do not have control over goods/services or pricing, and they do not carry the same level of risk.

Analysis of XYZ Limited’s Role

Indicators of a Principal:

Control over Pricing: XYZ Limited can determine the sale price of the tickets.
Inventory Risk: XYZ Limited bears the inventory risk by purchasing tickets in advance.
Payment Collection: XYZ Limited collects payment from customers, indicating a direct relationship with the customer.
Ownership of Tickets: By purchasing tickets in advance, XYZ Limited owns the tickets before selling them to the public.

Indicators of an Agent:

Service Fulfillment: The amusement parks remain responsible for providing the services and handling customer dissatisfaction. This could indicate a limited role in ensuring customer satisfaction.
No Credit Risk: XYZ Limited is not exposed to credit risk, which is typically managed by agents.

Conclusion

Given that XYZ Limited:

Sets the sales price,
Carries the inventory risk,
Owns the tickets before sale, and
Collects payment directly from customers,

XYZ Limited is acting as a principal in this transaction. Despite the amusement parks being responsible for service fulfillment, the control over pricing and inventory risk are critical factors indicating XYZ Limited’s role as a principal.

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