Consignment items not included in Income

[JLDBK]

I run a small store and sell retail apparel. I have a few individuals who I allow to consign out of my store. When I ring up their items I take a small percent. The way my Square is set up now I ring up the item and eventually pay out the consigner for the item minus my percent. The problem is my POS now shows the entire purchase as my income when I only made a small percent. How do I fix this? 

[Donnie-M]

@JLDBK As far as accounting goes the total sale is gross income to you.  Your cost of the good sold is what you pay to the consigner.  You would treat the consigner like a vendor.  For me in the restaurant business, I have the cost of the meat for the burger, labor for the person making it, and overhead.  When I sell the burger for say 10$ my gross income is 10$.  After I deduct cost of goods sold, labor, and expenses, my net income is .10c.

This is all reconciled on the back end by your accountant or tax professional or whoever does your books and balance sheet.

Hope this helps.  What you really worry about is net income, if you are using square for retail it has a place to put the cost of the item.

[JLDBK]

My accountant disagrees. Comparing you making a burger in a restaurant and me doing consignment sales are not the same thing. Your analogy does not fit this situation.  If I was asking a question about selling my apparel your answer applies but consignment sale is completely different. 

[Donnie-M]

@JLDBK Yes you are correct that the consignment sale is completely different.  I used that analogy because it has to do with the job of the accountant to reconcile those sales.  I understand the consignor actually still owns the inventory.  I know there is additional work involved as it requires to have someone keep a record and reconcile between remaining inventory and sale.  I am not an accountant, but I do realize you are going to have debits to the consignors account for your commission and credits to your account for commission income.

I think maybe what we are looking at is the point of sale software for square is excellent for 99% of businesses, but in your case it requires the back side accounting to show why the gross revenues are not actually income for your business.  I just want to try to help you in any way I can with my experience and how you can use square more effectively.  

I wish you the best and if I can give you any other insight I would be glad to try to help you.  As a fellow seller and running a business, I just want to help in any way I can.

[thefibreshop]

I have a few local artisans that sell through consignment. I enter the unit cost of the items as the portion of the sale they will receive when it sells.