How to Record Sales on Consignment in QuickBooks – Part 3

First you have to create two accounts on the books:

1. Consignment Sales – Liability (Other Current Liability)
2. Commission Income

Next you have to create some items:

1. Reduce Liability For Commission (Service) with a rate of negative 25%
2. Commission Income (Service) with a rate of positive 25%

Then you have to create a section in your item list for the inventory you are holding on consignment. In linear form it will look something like this:

• Held on Consignment
  • Widget A
  • Widget B
• When you set up these items, the income account that you map them to will be the new “Consignment Sales Liability” account.
• The Cost Of Goods Sold account and inventory asset account can stay as is.

Next we have to create a group for each consignment item to be sold. This is so that we can produce an invoice for the sale and show the customer one item for the sale amount while calculating our commission and the amount due to the consignor at the same time.

The 25% rate above is based on an assumption that this is the commission we are getting paid for what we sell on the consignor’s behalf.

Each group will consist of 3 items:

1. The widget (e.g. Widget A)
2. Commission Income (created above)
3. Reduce Liability For Commission (Created above). 

For related video and blog posts, go to The Sleeter Group’s QuickBooks Consultants Reference Guide.