In today’s digital era, an increasing number of freelancers are utilising online platforms to generate income from Google, with Google AdSense being one of the most popular among them.
This guide will detail the accounting process for revenue earned from Google AdSense—from understanding how the platform works to the necessary steps for accurately reflecting these earnings in your financial records.
Proper accounting is essential for maintaining transparency and compliance with legal requirements, which is particularly important for Google Ads specialists working as freelancers who have not yet sought professional accounting services or are dissatisfied with their current accountants.
What is Google AdSense?
Google AdSense is one of the most popular and widely used advertising platforms developed by Google. It allows website owners, bloggers, and other online content creators to monetize their content by displaying ads on their web pages.
AdSense is well-known for its easy integration and automated approach, making it a preferred choice for thousands of freelancers, bloggers, and digital entrepreneurs.
How does Google AdSense work?
Google AdSense operates on a pay-per-click (PPC) model. This means that whenever a visitor on your site clicks on an ad displayed via AdSense, you earn revenue.
Google automatically selects the ads that appear on your website based on the page content and visitor interests. This process, known as contextual targeting, ensures that the ads are relevant and useful to your audience.
Google’s algorithm analyses your website content and user profiles to determine the most suitable ads. Depending on the advertisers’ preferences and the settings you choose in your AdSense account, these ads can be text-based, graphical, or video.
Types of websites and online content eligible for Google AdSense
Google AdSense is highly flexible and can be used on various types of websites, including:
- Blogs and news websites – Many bloggers and news publishers use AdSense to generate revenue from their audience.
- Educational and informational websites – Sites that offer tutorials, guides, and other informative resources can also benefit from AdSense.
- Forums and social platforms – Online communities and discussion boards can integrate AdSense ads.
- YouTube channels – YouTube content creators can earn revenue through AdSense by displaying ads before, during, or after their videos. These ads are managed by linking a YouTube channel to an AdSense account.
Google AdSense registration and requirements
The registration process for Google AdSense is relatively straightforward, but it does require compliance with certain conditions. To be approved and start earning, your website must meet Google’s requirements, including original content, adherence to AdSense policies, and accurate contact information.
Once registered, it is crucial to comply with Google AdSense’s policies, such as the prohibition of artificial clicks, which could result in account suspension and revenue loss.
Invoicing and accounting for Google AdSense revenue
Google AdSense earnings must be properly documented and accounted for. Whether you need to issue an invoice depends on your legal status. Freelancers and sole traders may not always be required to issue invoices, but keeping records of received payments is crucial.
Accounting for AdSense Revenue:
- Receiving the Payment: Check your bank statement and Google AdSense reports.
- Recording the Revenue: Enter the income into your accounting software or financial records.
Free 30-minute consultation for new clients.
Tax Treatment of Google AdSense Earnings
Google AdSense revenue is taxed depending on the recipient’s legal status. Individuals are subject to personal income tax, while corporate entities must pay corporate tax.
The differences in accounting between individuals and companies include different tax rates, reporting obligations, and deductible expenses.
Mandatory VAT Registration for AdSense Revenue
An important aspect of AdSense revenue taxation is mandatory VAT registration under specific conditions:
- When receiving services from providers outside Bulgaria (such as Google, which is based in Ireland for EU transactions), an individual or company may be required to register for VAT under
- Article 97a of the VAT Act, even if they are not already VAT-registered. This VAT registration under Article 97a is not a standard VAT registration and applies only to the specific service received from the EU.
Special Cases and Considerations
If AdSense revenue is received in a foreign currency, it must be accounted for using the Bulgarian National Bank (BNB) exchange rate on the date the funds are credited.
Business entities can deduct expenses related to generating AdSense income, such as hosting fees, domain registrations, and marketing costs.
Conclusion
Accounting for Google AdSense revenue can be challenging, especially when navigating invoicing, tax treatment, and regulatory compliance.
Understanding these processes is crucial for maintaining transparency and legal compliance, but as a freelancer or digital entrepreneur, your time is your most valuable asset. Instead of spending hours trying to decipher complex accounting rules, consider consulting an experienced accountant.
A specialist familiar with online income taxation and Bulgarian tax law can help you avoid costly mistakes and optimize your tax obligations.
