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Accounting for sale or return and consignment stock in AccountEdge

Posted by Jonathan White on December 30, 2015. 0 Comments

Many AccountEdge users sell stock that's been received on a sale or return basis from suppliers. Galleries are a good example taking work from artists on that basis but many other types of business also use sale or return.

Accounting for the stock received and the related sales properly can be a little tricky but with a basic procedure in place it’s not too difficult although some help from an AccountEdge consultant may be needed in the early stages.

A number of different approaches can be taken to sale or return accounting; here's a brief outline of my current favourite.

 1)  When the stock is received from the supplier create a pro forma/dummy invoice to record the total stock received and the related total amount potentially payable to the supplier.

 2) When parts of the stock are sold record the sale as normal and report the sale (or an accumulated period of sales) to the supplier.

 3) When the supplier's invoice for the stock sold is received enter the invoice as normal and also create a pro forma debit note to clear the equivalent payable from the total created from the pro forma invoice in step 1 above.

 4) As regards the return of any unsold stock, a pro forma debit note as mentioned in 3 above would suffice. 

Whilst stock and the related amount potentially payable to sale or return suppliers will be inflated at any time that pro forma invoices are open, net assets will always be correct. Whenever financial reports of any importance are required, at the year end for example, ask your AccountEdge consultant or your accountant to help you pull a total for sale or return stock currently held and use a two line journal entry to debit trade creditors and credit stock with the total. That way an allowance will automatically be retained in the accounting records for stock sold for which a suppliers invoice has not yet been received. The entry should then be reversed with the reversing entry dated the day after the period end concerned.

Post is for general guidance only. Consult your accountant or other professional adviser before implementing new processes in your business.

AccountEdge is leading small business Mac accounting software. More details here.

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