Handling Consignment Goods with QuickBooks

Written by Doug Sleeter

There are two sides of tracking consignment goods: From the perspective of the Consignor, the person who is placing goods into someone else’s possession for them to sell, and from the perspective of the Consignee, the person who is selling goods that belong to someone else. In this article we’ll talk about how to use QuickBooks if you are the Consignee.

As the consignee you have goods that you are selling on the behalf of someone else. For this discussion, let’s assume that you get to keep 25% of the sales revenue on consignment items as commission.

To start, we’ll create two accounts in the Chart of Accounts. Create an Other Current Liability account called “Consignment sales – liability.”

Consignment Sales - liability account

Create an Income account called “Commission Income.”

Commission Income account

Next, we’ll create several items in the item list. Create a new one-sided Service item, “Reduce Liability for Commission” and link it to the “Consignment sales – liability” account. The rate is a percentage, not in dollars and cents. Give it a rate of -25% (negative 25%), which is the commission rate for our example.

Reduce liability for commission item

Create a second one-sided Service item, “Commission Income” and link it to the “Commission Income” account. Its rate is also not in dollars and cents. It is 25% (i.e. positive 25%).

Commission Income item

Create an Inventory Part item called “Held on Consignment” linked to your regular Cost of Goods Sold and Inventory accounts, as well as using the new “Consignment sales – liability” account for the Income account.

Held on Consignment part

You will create a subitem of the “Held on Consignment” item for all items that you bring in from vendors for you to sell on their behalf. Each of these items is linked to the same accounts as the main consignment item.

Consignment subitem

Now create a Group item for each Consignment item that you might sell on the consignor’s behalf.

Group item for Widget A

You will create a Vendor record for each consignor that you are selling items for. The consignor sells these items to you for $0 each so that you can enter the total on a bill for $0 as shown below. That way you know exactly how many of the consignor’s goods you have on consignment.

Consignor Bill at zero cost

When you sell the consignor’s goods, enter the invoice as usual but use the group items created for each consignment item. Remember, the items in the group will not appear on the printed invoice. That way, the commission is calculated behind the scenes.

Sale of Consignment (Group) Item

The customer sees this invoice without the group’s individual lines appearing:

Consignment Invoice

Here are the debits and credits behind the scenes for this invoice:

Behind-the-scenes posting of sale of group consignment item

Therefore, upon selling the group item, the quantity on hand of the consignment item goes down, and the income goes into the Consignment sales liability account. The Consignment sales liability account is reduced by the 25% commission you earned, and that goes into the Commission income account.

This method updates the liability to the consignor vendor upon each and every sale of a consignment item. It also updates the commission income earned immediately. The amount showing as the Commission sales liability ($100 sales less the $25 commission) shows accurately on the Balance Sheet:

Consignment sales owing (shows net of commission earned)

Now you will write a check to the consignor for the net amount of the sales after deducting the commission you’ve earned:

Check to consignor for sales revenue owing net of commissions earned

And the amount of commission earned shows accurately on the Profit & Loss:

Commission earned shows on the Profit & Loss

The Sales by Item Summary report will be correct, and you can filter it for consignment items only, remove COGS columns and memorize it:

Sales by Item Summary report filtered for Consignment Items only

The Inventory Stock Status by Item report will also be correct.

Inventory Stock Status by Item report

This is an excerpt from The Sleeter Group’s QuickBooks Consultant’s Reference Guide. This book has over 500 pages of tricks and workarounds for difficult client situations.

The original material was created for the QuickBooks Consultant’s Reference Guide (CRG) with the help of Esther Friedberg Karp of CompuBooks Business Services. See the CRG for more details, such as how to deal with the issue from the standpoint of the Consignor.

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About the author

Doug Sleeter

Doug Sleeter is a passionate leader of innovation and change in the small business accounting technology world. As a CPA firm veteran and former Apple Computer Evangelist, Doug has melded his two great passions (accounting and technology) to guide developers in the innovation of new products and to educate and lead accounting professionals who serve small businesses.

Doug is best known for his expertise in QuickBooks as well as driving the adoption of online accounting and small business process solutions. In the early 1990s, Doug was a pioneer in developing the first QuickBooks seminars in the country and has since built the largest group of accounting software consultants in the small business accounting profession. Doug serves on several advisory boards for technology companies and has consulted with numerous industry leaders, including Intuit, Sage, Apple, and Adobe Systems.
CPA Practice Advisor has recognized Doug as one of the "Top 25 Thought Leaders" in the accounting profession for the past several years and he has been named to Accounting Today's "Top 100 Most Influential People in Accounting" each year since 2008. Highly sought for his ability to engage and educate accounting professionals, Doug presents at various accounting events throughout the year, including those held by the AICPA and numerous state CPA societies. Doug also hosts the annual Accounting Solutions Conference, attended by hundreds of accounting professionals, industry leaders, and technology developers.


  • Absolutely beautiful. Have never had to account for consignment stock but this is just such an elegant solution.

  • Hi – This article was a great help in getting me started! I do have a question though as to how I could tweak this to fit my eBay business…

    I calculate consignment commissions based off the NET proceeds of a sale. So for example, I sell a widget on eBay for $100, Paypal takes 10%, and eBay takes $20. My NET proceeds would be $70. I would then charge a 25% commission off the $70.

    I was able to create an item for Paypal Fees (I linked it to an expense account), and I use that on my invoice to record the fee PayPal takes. So now I am able to calculate my commission after PayPal fees.

    Here is where I am stuck – how can I also get eBay fees on my invoice? PayPal fees come “off the “top” of a PayPal transaction, whereas eBay fees are charged later to my credit card.

    Any advice would be appreciated. Thanks!

  • Great explanation! How would you track classes using this method? I would like to track my consignment vendors by class using the daily sales receipt, and when I try to use the process you described, I cannot figure out how to run a report that would show the money I owe my consignment vendor. I was previously tracking by class…

    If anyone else knows I would greatly appreciate the help! Thank you

    • Amber, the full information can be found in The Sleeter Group’s QuickBooks Consultant’s Reference Guide. In addition, we will have a series of video blog articles about this, coming up soon.

  • Thanks you for the informative article. Can you see any limitations to using this approach with Quickbooks Online Simple Start?

  • This sounds like just the information I’ve been looking for, however I have a couple quick questions:

    After using this method how would I check how much a consignor is currently owed at any given time?

    Also would this allow me to adjust quantity on hand (say I gave back an item without selling it because the consignment period was over) or adjust the value (say they wanted to lower the price of an item to help it sell) without screwing up the reports?


  • Thank you for the informative article.

    I operate a non-profit volunteer run gallery and gift shop, we have a sliding scale for commissions, depending on how many hours the artist volunteers each month in the shop. Is there any way we can create a sliding scale for commissions in Quickbooks that is customized to the vendor?

    Thank you for your help!


    • Hi Sheena, One way you could approach this would be to create a time sheet (requires QuickBooks Pro, Premier, or higher) for each volunteer (the artist who has their art on consignment at your shop). Then, periodically (weekly, monthly, or whenever you create the commission payments), run a report on the time sheets.

      Then, for each artist, create a bill credit for the value you assign to their hours worked.

      So using the example above, if you want to Bobby Van Camp $25 of credit for working at the shop, the Bill Credit splits would look like this:

      Bill Credit total = $25
      Items on the bill credit:
      Reduce Liability for Commission $25 <credit (increase) liability for service hours**

      Next, then, to figure out how much to pay the consigner, double-click on the consigment sales liability and total by vendor.

      When you write the check, use the amount for that vendor, net of the credits. In Bobby Van Camp's case, the check would be for $100.

      ** note that it might be even better to create a new item called Credit for Service Hours that points to the Consignment Sales Liability account. Then you could do reports on that item.

      As homework, note that there are several ways you could accomplish the consignment sales problem. This is just one way, and depending on your situation, you might set things up differently. Maybe you'll prefer to use Bills, Bill Credits, and Pay Bills instead of "write checks." Use your T-accounts to figure out what you're trying to debit and credit, and using Items, you can give friendly names to each line on the transactions (invoices, bills, bill credits).

  • Mr. Sleeter,
    Thank you for the very informative article! Our company just opened up a small retail booth for consigned artists as well as our own handcrafted art which include jewelry, pottery, cards, a lot of various items.
    We have 3 commission types: supplier/company: 60/40; 50/50 + .95; wholesale cost/sell at our discretion. We make daily deposits from the register receipt, cash,check,cc; and the z tape shows us the total sales for each consigned vendor (1-15 is how they are identified on the register receipt). We use the sales order book to see what item actually sold and have been maintaining an excel sheet to keep track.

    Couple of questions, thanking you in advance! Since each artist gives us a variety of items, could I make each vendor Widget A, B, etc (inventory part item), and state the total number of items held on the bill, regardless of what the items are, just a qty of whatever?
    Also, because we have 3 commission structures, would I have to have 6 different “service items” (positive/negative)rates? I would then have to have 15 Inventory Parts Items and 15 Group Items for each vendor correct?
    Lastly, (your hoping!)do I have to make a sales invoice every day to customer “Retail Store XXX” with my item being the Group Item of Widget A,B, etc (my vendors), to be able to receive the payments against it to be able to record a correct deposit? I would also have to create on item for sales tax to record on the retail invoice. We were only a wholesale company before.
    We’ve only been doing retail for 8 days, so the only thing posted right now are the deposits. I thought maybe there was a way to use the purchase order function, but I see from your advice that we need to keep the commission income separate from our own true income of our goods. I hope this hasn’t been too confusing. Thank you very much for any advice you could provide.

  • HI, thank you for the article. The screen shots were very helpful. I walked through the process, but after using this method, how would I check how much a consignor is currently owed at any given time? I can’t see where the liability is linked the vendor. Thank you for your help. Best Regards, Anna

    • Anna, that would depend on how many consignors you are working with.

      If it is a small number, then you can create a separate Consignment Sales Liability account for each one, and separate items for each of the types that post to that account. If you have 3 or 4 regular consignors, that isn’t a big problem. Then it is very easy to see the balances.

      For a larger number then it gets tougher. You can set the “preferred vendor” for the consignment items to be that consignor/vendor, then you can see sales figures for a time period by looking at the Inventory Stock Status by Vendor report, but that just tells you the quantity. You have to figure the value yourself. Tough question, I’ll have to give that some more thought.

  • Very clear the consignment sales demonstration. Thanks.
    I have a quation:
    How I can show in the invoice to my customer the quantity and price of the product that we are selling, the same that we received previously as consignment???

    Thank you


    • Sergio, in our example, the “Widget A” item is the actual consigned item that is being sold. You are selling it as a part of the Group item “Widget A Consignment”, and on your invoice you wold see a quantity and price each for that item.

  • Hello. I am also just getting started with a consignment store and want to use Quickbooks Point of Sale for entering items vs entering in Quickbooks Financial. However, I dont see these options in POS. Have you worked with POS and could you also please offer some advice on how to set it up.
    Thanks in advance and regards,

  • This is so well written and the screen shots are such a great help. And you know there is a but:))) we have a large number of consignors and this doesn’t seem practical for that or am I reading it incorrectly..also I saw an earlier post asking about linking liability to vendor as I know how much each vendor is owed…but I don’t see an answer….any suggestions…we have approx 50-100 vendors on consignment .


    • Hi Charee,

      I have to agree with you that using this method with a large number of consignors is somewhat unworkable, or at least painful from the perspective of the data entry perspective. Unfortunately, I don’t have a magic bullet for you. Perhaps one of our readers could suggest a method that would work better for large scale consignment situations.

      Very few businesses have the consignment situation and that’s why none of the standard accounting software has any direct support for it. So we decided to write this up as a “lifeline” to those of you who are dealing with consignment situations.

  • I would love to talk to you about how to set up a books for a talent agency. We collect the money on behalf of our clients, take commission on the gross earned (99% of the time taxes are withheld from their check by the payroll company) and we send them the balance check. From time to time the client will ask to see their gross earnings, commissions withheld and the balance check sent to them by job.

  • I love the excerpt, however I have one question. On the balance sheet it showed in this excerpt the balance minus the commission (75). This made it easy to look at the balance sheet and write a check for that amount without figuring the percentage. I separated each vendor in the balance sheet, but it does not subtract the commission amount until the end. How can I set up my balance sheet or find another report where the commission is already subtracted where I would not need to do this manually?
    Thank you

  • Hi,

    I think this is fantastic, it makes my life much easier.

    I do however have a question. I would prefer not to show the breakdown of the revenue generated from this transaction to those entering the sales orders. I’m wondering if this process can be done using an assembly rather than a group?

    I tried to set this up myself but ran into a snag when trying to put a percentage in the service item – it gives an error message and doesn’t allow you to do it. Is there any way this can be done?

    Any help would be greatly appreciated!


    • I’m not sure why you would want to use an assembly instead of a group? That would just add an extra step (the “build” of the assembly) and not gain any benefit that I can see.

      As far as a negative percentage for the rate of a Service item – I don’t have any problem with setting that up (as shown) using the most current US version of QuickBooks on the desktop. What QB product are you using?

  • HI i have got a problem with consignment sales in quickbooks.When we recieve the consignment we normally record an item receipt Thing is we are normally invoiced by the consignor only when we make a sale of any amount from the consignment stock.The problem is i cannot enter a bill against selective items in in the item reciept. am using quickbooks premier 2014.Any help on that.?

    • Gibson,

      The method presented here would allow you to skip the item receipt and just enter a $0 bill when you receive the item into your inventory. It has zero cost at that point anyway.

      Then, when you sell it, our method helps you automatically calculate the amount you owe to the consignee.

      So you don’t really “need” the invoice from the consignee because you calculate it yourself.

      As I said in an earlier comment response, this doesn’t scale very well, but if you have a relatively small number of consignment items, this method works great.

      Re: Which version of QB? It works with ALL versions of QB desktop. You would need to modify it for QuickBooks Online because the online version doesn’t support group items.

  • I have consignment that I inventory at a set cost. I sell to a variety of customers at many different prices based off of a retail list price. How do I track sales cost of items sold in this manner. I almost think that I need to bill myself at the end of each month on what I have sold to make my p & l right.

    Please Help

  • If I was entering 60% for the store and 40% for customer would I enter that as 60% under service for commission income and – 40% for the other. right now I have 40 and 40 which puts 40% in my liability acct but the commission acct always shows the amount for full sale, for eg: sold item for 10.00 the commision acct shows 10.00 and 4.00 for the one transacation. Confused thanks 🙂

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