[GNC] Another Beginner Accounting Question

[Michael or Penny Novack]

On 12/22/2021 6:20 AM, Patrick Skelton wrote:
> Just when I was thinking I had accumulated all the pieces of the jigsaw I
> need, I discovered the A/R account.
>
> I have a shop that charges 50% margin on whatever they sell. So, if they
> sell one candle for £12 then I will invoice them only for £6. They get 30
> days credit, so ideally I'd use the A/R system. I've played around with
> this and it seems to do what I expect to the Balance Sheet and Profit &
> Loss Report except for one thing: I seem to lose any record of the 50% of
> the total sales value that they have taken.
>
> There is a Discount column in the invoice but this doesn't seem to show up
> anywhere in the accounts. I'd like to have some record of the money I am
> 'losing' in sales commission, maybe as an expense.
>
The fact that THEY are selling the candle for  £12 has nothing to do 
with you (and your books). You are selling it to them for £6

Correct me if I m wrong, but is this a situation where you are selling 
both "retail" and "wholesale"? And that this is making you perceive that 
you are "losing" the difference between the wholesale price and the 
retail price? Why? What is the ratio of your sales, wholesale vs retail? 
Suppose that it were instead 100% wholesale? Would your perception of 
"loss" still make sense?

<< please note -- these are questions for you to think bout, not give us 
answers to >>

Now suppose the other way around, your business is mostly retail. They 
you might make provisions for a "discount" of 50% for select customers. 
Since I don't use the business features, I can't help with how you set 
that us on the invoice.

I do understand why you see this as a "commissions" expense, but you are 
giving up ownership of the stock to them. At least I think that is how 
you have set things up. In the possible case that you have set things up 
that they can return stock (along with partial payment of the invoice; 
what portion sold) then that is a different situation. I do not know 
what is customary for that sort of business so I strongly suggest you go 
through business accounting texts till you find that specific example.

Michael D Novack

PS -- there are a couple other sorts of (standard) business arrangements 
for which I haven't a clue what is customary. For example, I know that 
businesses that sell "on approval" usually send invoices, but they 
expect some if not often all to be "returns".