Help on how to charge one department a commission that another department brings

[sudheerm]

Hi All, Need help with some accounting advice. We have three sources of revenue, and hence 3 departments. Sales, service, parts. Now when the Service dept gets an order and if they purchase parts from our internal Parts department, the parts department bills that using the same margin applicable to external customers. (we include both service & parts together in the invoice to the customer. there is no internal billing).


Since this business is brought to the Parts dept by the Service (workshop) dept, we now have agreed to charge the Parts dept 15% as commission and credit that to the Service dept.


My question is, whether I should debit the Parts dept's sales revenue GL Account or add to the COS.

And should this be credited to the Service dept as other income or their prime revenue GL? Should there be a journal entry for this or should it be shown in the Excel reports as an appropriation without being entered into the accounting ERP system?

How can I simplify this repetitive (monthly) task so that I can save time? Please note we have no transfer pricing arrangement.

Appreciate it if someone could help! Thanks a lot in advance.

 

[kirby]

Make sure the margin that Parts charges Service goes to an “inter-company” -actually “intra-company” - revenue acct for Parts and same amount to an intercompany expense acct for Service. Then be sure to wash these out at monthend as this is not “real” income and expense.
Same process for the commission. Add to COS for parts in intercompany accts