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QUESTION: I want to know what the Quickbooks journal entry would be for the following process:
I am a broker; an end user contacts me to buy equipment for their company.  I contact a equipment manufacturer, negotiate a price and receive a quote.  I invoice the end user for the equipment which includes a 10% markup as my commission.  The end user accepts the invoice and wire transfers the funds to my checking account.  I in turn wire transfer funds to the manufacturer for the equipment which is shipped directly to the end user.  What journal entries would I make when I invoice the end user? When the funds are wire transferred into my account?  When I wire transfer funds to the manufacturer.  Thank you for your assistance.

ANSWER: Hi Travis

QuickBooks was originally sold as the software that does the accounting for those
who don't need or want to know accounting.  In order to accomplish this task
QuickBooks had included Forms for your use depending on transaction

When you invoice the client
Enter a bill payable to the vendor for the 90% owed.   
(Vendor menu > enter bills> if the vendor does not issue a bill with a reference
  number, enter the invoice number you used to invoice the customer as a reference
   post to cost of good sold account#
 The Journal entry that the bill makes is:
 Debit to Cost of goods sold
 Credit to accounts payable

When you receive the funds from the customer using a receive payment form
#Customer menu > Receive payments#
The Journal entry  that the customer receive payment makes is
 Debit to undeposited Funds
 Credit to accounts receivable

Next you need to make a deposit into the bank for the $ received from the customer
Use a Make Deposit Form
#Banking menu> make deposit#
The Journal entry  that the Make deposit form enters is
 Debit to Checking account
 Credit to undeposited funds

Now it is time to record the payment to the vendor
Use a Pay bills form
Vendor menu > pay bills > select the bill applicable to the invoice that was just paid
At the bottom of this form you will be able to select what bank account and if the
 check is to be printed #in your case, since it is an electronic payment, you will
 want to select assign check number). In the next window QB will ask you to enter a
  check number, just leave it blank and continue

The Journal entry  that the Pay bill form enters is
 Debit to Accounts payable  
 Credit to Checking account

Hope this helps,

Linda Saltz, CPA
Advanced Certified QuickBooks Advisor
http://www.qbalance.com

We sell and support QuickBooks Enterprise
http://www.qbalance.com/enterprise_Quickbooks.htm




---------- FOLLOW-UP ----------

QUESTION: Why would the first journal entry of:
Debit to Cost of Goods Sold
Credit to Accounts payable
be made for a bill payable to the vendor.  Since I am a broker I will not physically take title or ownership of the goods from the vendor.  I am just receiving a quote from from the vendor for the purchase of the goods to pass on to the customer.  Doesn't an entry for debiting cost of goods sold assumes I will have an inventory of this item.

Also, when I invoice the customer don't I have to create and entry for:
Debit to Accounts Receivable
Credit to ?
I don't know what the credit would be for this transaction.  Ordinarily when you create an accounts receivable you have to credit a revenue or income account.  Since the amount of the accounts receivable is not revenue for my company and is only to receive the funds from the customer to purchase the item on his behalf, what should the credit be for. My broker's fee for this transaction is included in the invoice.

When I receive the funds from the customer to purchase the item from the vendor the entry should be:
Debit to ?
Credit to Cash
I don't know what needs to be debited for this entry.
Finally, upon receipt of the funds from the customer and I pay the vendor for the goods and they are shipped to the customer the entry should be:
Debit to ?
Credit to Cash
I don't know what should be debited for this transaction.

Given these new scenarios, can you instruct me on what new entries should be made.  Thank you.

Answer
Why would the first journal entry of:
Debit to Cost of Goods Sold
Credit to Accounts payable
be made for a bill payable to the vendor.


You mentioned
The end user accepts the invoice and wire transfers the funds to my checking account.

If you are being paid for the sale, you are the seller... not the broker.
The vendor is invoicing your company and is expecting payment from your company.
Based on the above, the supplier is only drop shipping the goods to your customer but
you are responsible for payment for that item

If indeed the scenario
Is your are selling to the customer
the customer is paying you
You are paying the vendor,

Then the transactions I described  in my first response would be accurate.

Your TAXABLE income will only be 10%

You will have a 100% revenue
and a          90%  cost of goods sold
leaving         10%  gross margin from which you can deduct Other
         operating costs such as telephone, utilities, selling expenses.


Let me know if the vendor is collecting the money from the sale directly from your
customer and I will give you a separate set of entries.

The IRS requires you to report amounts deposited into your bank account from customers
as revenue.  They do not allow netting of income and expenses and reporting the
only the net income.    

Linda Saltz, CPA
Advanced Certified QuickBooks Advisor
http://www.qbalance.com

Quicken & Other Budget/Accounting Software

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QuickBooks best practices, troubleshooting, accounting, tax We have over 70 pages of website content about QuickBooks tips, running a business, tax and business startup at http://www.qbalance.com

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Accountant and CPA over 20 years. Specializing in accounting software for over 12 years, Certified QuickBooks Pro Advisor, QuickBooks seminar instructor since 1997.
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