Recognizing the revenue on when virtual 'credits' are purchased as opposed to used
"I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct.  Also, I preface this with the caveat that I am neither a lawyer nor an accountant.  However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time.  This is because the customer has pre-paid and purchased a service (i.e. the ""credits"", which are units of time available in the application).  This is clearly a complete transaction.  The use of the credits is irrelevant.  This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used).  This mirrors many online service providers (say, NetFlix) in business model.   This is different from the case in which a customer purchases a ""gift card"" or ""reloadable debit card"".  In this case, sales tax is NOT collected (because this is technically not a purchase).  Revenue is also not booked at this time.  Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card).  To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently?  Suppose the gift card is used to purchase a tax-exempt item?)  For justification, see bankruptcy consideration of the two cases.  In the former, the customer has ""ownership"" of an asset (the credits), which cannot be taken from him (although it might be unusable).  In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment.   Consider also the case where the cost of the ""credits"" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free).  The customer has a ""tangible"" item (one credit) which gets the same functionality regardless of price.  This would be different if instead of ""credits"" you instead maintain an ""account"" where the user deposited $1000 and was billed for usage; in this case you fall back to the ""gift card"" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service.  For this model to work, the ""credit"" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of ""services"".  You may have particular responsibility in the handling of this ""deposit"" as well."
Unfortunately not. Even if the credit card balance is positive (i.e. customer has overpaid the credit card account), you cannot withdraw cash (for free) - as any cash withdrawal is subject to 12.9% interest - even if repaid in full at the end of the month! The clarity credit card is one of the best cards for overseas spending, as its load free (no fees for purchases abroad) and it gives near perfect exchange rates. If your balance is positive, you start at £0, then fund that credit card account from your bank account £500. You can then spend on your credit card, and when your next bill is due at the end of the month - they will use that extra £500 sitting in your account first, and ask for the remainder from you. i.e.  scenario1:  scenario 2: It is better in my opinion, to set up a direct debit to always clear out the full amount on your credit card. That way, you have cash in your bank account for emergencies (getting £500 back from a credit card will take a few days to process as opposed to having the ability to withdraw cash from the cashpoint 24/7). And once the direct debit is paid automatically at the end of the month, there are no fees - voila your credit card is almost like a debit card, spend on it when you like, it gets paid automatically, no hassle, no worries. This approach does take a careful mindset though, as you need to know your credit limits and also you need to ensure your bank account has enough to pay off the direct debit at the end of the month. Otherwise those darn fees will get you (and hurt your credit rating). For cash spending, you will want to either take cash with you (check online here for best rates & get the money well in advance to avoid fees). Also in some countries the exchange rate is better there, than in the UK, google will help you here. If you dont like the idea of carrying large sums of cash with you can use a prepaid card like CaxtonFX, which is one of the better ones out there. The other well known ones are FairFX and Travelex Cash Passport. What a coincidence! This was an exam question for my business law class.  The main reason why individuals are not allowed to deduct expenses is because income tax revenue would be zero.  The reason being, if an individual is allowed to deduct expenses he/she would spend 100% of their income and deduct it all on their tax returns, which would mean he/she would pay virtually no income tax. This is bad for the gov't and the economy.  It's bad for the gov't because they loose tax revenue, and it's bad for the economy because people would not have any savings for tough times, which can send the economy into a negative spiral. "Paying in physical cash is almost never a good idea for large purchases (unless you like being audited and/or having lots of attention from law enforcement).  All purchases over $10k in cash need to have special forms filled out for the IRS and Financial Crimes Enforcement Network, so this is not a tinfoil hat conspiracy theory... if you do that on the regular, you ARE being investigated.  When people say ""cash"" for normal purchases, they generally mean a wire transfer (e.g. buying a house ""cash"" = wire transfer between banks).  In this case, purchasing a company ""cash"" is contrasted with purchasing with stock.  So instead of getting $13.7B of AMZN, Amazon takes out a loan (or pulls their money from cash on on hand) and transfers it to the financial institution handling the sale.  Everyone who owns WFM stock gets paid out in cash, as opposed to receiving some number of shares of AMZN." "Your biggest risk with a vendor like this is not that your Credit Card Number will be stolen in transit, it is that it will be stolen from the vendor. I agree with @mhoran that using a one-time number is the best plan, provided you have a bank that offers such numbers.  Bank of America calls it ""Shop Safe"" while Citibank calls it ""Virtual Account Numbers"".  I think Discover card has something similar, but less useful, in that they aren't really one-time use, and I think American Express discontinued their service.  AFAIK no one else offers anything like it.  If you can't get a one-time number, then I was going to suggest buying a Visa gift card, until I put together the fact that you are making a purchase in Asia and the gift cards are not authorized for international payments (due to PATRIOT act restrictions).  Visa does offer the V.me service which might help, but I doubt your vendor participates (or would even be allowed to participate) if they don't offer a secure order form.  You can open a pre-paid Visa card account, which is probably what I'd do. You can buy pre-paid Visa cards the same way you buy Visa gift cards, the difference being you have to register the pre-paid cards (thanks, PATRIOT act) before you can use them.  But it's not that big a deal to register one, you just fill out the online form your your SSN etc and you're good to go. Load it up with enough money to cover your purchase and the FX fees and then cut it up." But why can't two companies exchange goods directly without paying VAT? This would make the famous carousel fraud scam impossible and businesses won't have to deal with complicated refunds. Sales tax in the United States works as you describe.  Sales tax is charged only to end customers, not to businesses that themselves charge sales tax.  But this means that a criminal business can charge tax and just pocket it unless someone else reports it.  They can also evade income tax the same way.  Not to mention other issues like cross jurisdiction taxes (e.g. internet sales often evade sales tax).   The whole point of a Value Added Tax (VAT) is that they charge at each level.  This creates a system where each buyer reports the tax paid to the seller so as to be able to deduct it.  So the seller has to pay the VAT that they charged.  Or the tax authorities know and can revoke their VAT license.   If only the end user is charged tax, then fraud is easier than under a VAT.  So easy, I doubt they have a special name for it.  The fraudulent business just collects tax from end users and disappears.  Or simply fails to record those transactions.  You could call it missing transaction record fraud, but why bother?  It's just straight up tax fraud.  The complexity of the carousel fraud arises from the difficulty of evading a VAT. I'll give the credit to @Quid in the comments section of the question.  You put out $10k, you got back $20k, that's a cash gain of $10k, how the asset was valued between your purchase and sale isn't relevant. From an accounting perspective, the company is the only party that is realizing the loss (as they have sold the asset for 40K less than par). You the buyer, only get to see the initial buy and sale of such capital asset.  Example: A company purchases a car for $20,000 and after depreciation it is worth (book valued at) $2,000. It is then sold to a customer for $3,000.  Does the customer realize a loss of $1,000? No.  Does the company realize a gain of $1,000? Yes.  Your bank analogy is flawed in two ways: "There's no easy solution to this. Unfortunately I think you need a different approach, as you say, using software to track expenses to visualise the percentages and such hasn't helped and in my own experience this sort of money management does not work with all people. Maybe you need to look at the expenses and decide what you can cut out. Somehow we all need to make a distinction between what we need (milk, bread) and what we don't need (magazines, dvds) but still purchase every now and then. Sadly buying things for the second category quickly builds up a bill just as big as the one for the weekly shop only that it contains nothing of actual value and it just seems too easy for some to spend and equal amount of money on ""wants"" as on ""needs"" and if a substantial amount of your outgoings are in this category that's where you need to focus the discussion. If you can't find any purchases like that I suspect you need to buy less expensive food." Here is how your CEO has to see it. Of course, eventually most revenues are generated by IT systems but technically IT still is an expense only activity unless of course you are selling the software/services offered by it. According to the US GAAP, software development costs are capitalized when a firm develops a software for its own use (e.g., nice shiny UI show bank's VaR, algorithmic trading engines, internal security infrastructure etc.).  When the software is developed for sale, all the costs are expensed as incurred until the technical feasibility is established after which the costs are capitalized. The income is realized when licenses to use the software or the services provided by it are sold. According to international standards, the treatment for both the use cases shown above is the same --all the costs are expensed as incurred until the technical feasibility is established after which the costs are capitalized. The income is realized when licenses to use the software or the services provided by it are sold.