Double entry bookkeeping - Record incoming money which I would hold temporarily as a custodian

Question

My dad's clients often transfer payments, which they owe to my dad, into my bank account [for technical reasons, some payment types into my account are not currently available in my dad's]. After a while, I transfer the amount so accummulated to my dad's account.

How do I keep a record of this in form of double-entry bookkeeping?

I see 3 accounts in play here:

• Income/DadClientele/ClientName;
• Asset/Cash/MyBankAccount;
• Liability/Payable/Dad

But I don't see how to make them work together for an incoming amount of 500:

• Credit of 500 under Income/DadClientele/ClientName;
• Debit of 500 under Asset/Cash/MyBankAccount;
• Credit of 500 under Liability/Payable/Dad

Is this correct? While it does fulfill the Equity = Asset - Liability formula, something feels wrong to me.

PS: One way could be to not see this as an Income at all, and see it as movement of money out of (=> credit) Liability/Payable/Dad/ClientName, and in to (=> debit) Asset/Cash/MyBankAccount. So:

• Credit of 500 under Liability/Payable/Dad/ClientName;
• Debit of 500 under Asset/Cash/MyBankAccount;

Answer 1

The correct accounting, assuming that if 500 comes in, you're sending the whole amount to your dad would be

• Debit Asset/Cash/MyBankAccount for 500
• Credit Liability/Payable/Dad for 500

Then when you forward the funds to your dad

• Credit Asset/Cash/MyBankAccount for 500
• Debit Liability/Payable/Dad for 500

No income is earned, etc. (though depending on how often this happens and how large the amounts are, your bank may have questions for you and there may be regulatory and tax considerations: it will look like you're running a business and not reporting income, and then it may look like you're running a money transfer agency)

What if you were collecting, say, 1% of the funds? Then you would likely account for it as

• Debit Asset/Cash/MyBankAccount for 500
• Credit Liability/Payable/Dad for 495
• Credit Income/CollectionFees for 5

And then when forwarding funds to your dad

• Credit Asset/Cash/MyBankAccount for 495
• Debit Liability/Payable/Dad for 495

Answer 2

If these are your personal accounts, and you consider your dad a separate financial entity - such that your owings to him are a Liability - then the cashflow isn't Income for you at all. It's touching your account temporarily before it leaves, and you derive no income from it.

On the other hand, if you're doing your dad's accounts at the same time as your own* - such that this payment is income for the accounts you're modelling - then you have no Liability to him, the latter payment will just be a transfer between two Asset/Cash accounts. (Or at least, if you really want to model a Liability from your bank account, then this is an Asset for your dad's bank account and the two sides balance still.)

*mixing your personal accounts into someone else's business accounts sounds like a terrible idea, as one of the comments points out. Even if you're doing his books for him, it is a good idea - and likely a legal requirement - to keep the two completely separate.