USA Accounting for a Consignment Sale (USA)

[jsw00t]

Hi All,

I have been asked to determine the journal entries for a simple sale of an item sold on consignment. The Merchant fee is causing confusion. Can anyone provide guidance?

Scenario: A Widget is sold for $50. The Consignee is assessed a $2 merchant fee (will be withheld from the funds surrendered to the Consignor) and will retain a $10 commission fee.

Cash Dr $50
Merchant Fee Dr $2
Cash CR $2

Commission Revenue CR $10
Due to Consignee CR $38

I'm unsure how to apply the $2 credit to balance this out when withholding the $2 from the Consignee.

Thank you in advance!

 

[DrStrangeLove]

I think the Merchant Fee line in your entry is backwards. The consignee is just collecting the fee for remittance, just like the consignor's account balance. So it should be a liability, which has a credit normal balance.

On the consignee's books:

To book the revenue side of the Widget sale:
DR Cash........................... 50
CR Consignor's Account........... 50

To book the commission due to the consignee and the merchant fee payable:
DR Consignor's Account........ 12
CR Revenue - Consignment Commissions...... 10
CR Merchant Fees Payable................................ 2

So if you wanted to do it in one step:

DR Cash............................................................... 50
CR Consignor's Account........................................... 38
CR Revenue - Consignment Commissions.............10
CR Merchant Fees Payable....................................... 2

Then you'd do entries to remit the Consignor's Account and Merchant Fees Payable to the proper parties.