Product Financing Liability

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Posted on by Joseph Markovich

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Hello:

We have a situation with one of our vendors where we supply them components that are used in manufacturing of products that are sold to us.

The vendor supplies us with a purchase order we enter in Sales Trx Entry, we order the components from a vendor in the US, they are shipped to our warehouse in the US, and then we ship them overseas to our vendor for production.

These transactions are showing in our sales numbers and the sales GL account -- our auditors have told us this is not a sale, but product financing liability.

As of now, our Finance people are creating a journal entry to move the amounts out of sales and COGS to this liability account and a WIP account.

When the items are sold back to us, what are we supposed to do with the amounts of the components in that liability and WIP account? Where does that go once they are used in producing the final product and sold to the customer?

Thanks.

-Joe

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Joseph Markovich 3,900 on at

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Re: Product Financing Liability

Forgot to add something to this -- the only workaround we could think of so far is to change the sales and returns GL accounts for the items we are selling to the vendor to the liability account so it never hits sales.

Is there a better way to do this?

-Joe