Need suggestions on how to account for receipt of consignment merchandise and how to pay consignor reflecting sales discount and consignment commission.
There is no accounting for the receipt of consignment merchandise because the company does not own the goods. You credit your sales for the total amount that you sell the goods for and then you use Write Checks and pay the Vendor their portion which is charged to Consignment fees CGS expense. The net amount is your taxable income. It's different from actual inventory because the company actually purchases that and owns it at the time of sale.
Thank you for your suggestions. I follow what you are saying. What would be your suggestion if the consignment retailer wanted to keep track of his consignment inventory?
The way we handle consignment inventory is to make a separate invoice for EACH item that we are putting on consignment in the store. Sounds like alot of typing but you can memorize the invoice and repeat it for eack like item and like customer.Make the invoices PENDING and when the customer pays you, mark the invoice final and recieve the payment against it, applying any discount that he is taking in the payment window. The store receiving the inventory can then pay you by Instead of sending the customer a ton of invoices, you can send them a statement listing the invoices. It would be easier on his end also to list each invoice in his payables and pay against the correct invoice.
We were in the consignment business for a number of years and I can tell you that it is well worth your money to buy a program tailored to the consignment business. We used the program from Liberty Systems and found it to be just great.
