In a commission sale you sell — in your own name — goods that still belong to someone else, the principal. Because the goods are not your property, they never enter your balance sheet and are not reported as inventory. You record them only in off-balance-sheet accounts, and in your own books you recognise mainly the commission, which is your real revenue. Treating someone else’s goods as your own is the most common and costly mistake.
What is a commission sale and whose goods are they?
Under a commission arrangement, the commissionaire undertakes to arrange a sale in their own name but for the principal’s account — typically to sell goods. Outwardly they act as the seller; economically they act on someone else’s behalf. The legal references differ by country (Slovakia in its Commercial Code, Czechia in the Civil Code), but the accounting principle is identical.
Ownership is the key. The goods remain the principal’s property until they are sold to a third party. The commissionaire handles the goods but never becomes their owner — and that single fact drives the entire accounting treatment. If you build your books correctly from the start, as we describe in our overview of professional accounting in Slovakia, the rest follows naturally.
Why don’t commissioned goods belong in your balance sheet?
Because commissioned goods are not the commissionaire’s property, they cannot be reported as inventory in the balance sheet. This is the fundamental difference from a normal buy-and-resell business, where goods pass through your ownership on their way through the warehouse.
Accounting rules do not regulate commission sales separately, so the treatment follows the substance of the relationship: someone else’s property is recorded off the balance sheet. Off-balance-sheet accounts are a full part of double-entry bookkeeping, not an optional extra.
How does the commissionaire record receipt and sale?
The goods received are recorded off-balance-sheet at the agreed value. On the sale to the customer, revenue arises together with a payable to the principal for the price of the goods, and the difference — the commission — is the commissionaire’s income. The sequence usually looks like this:
- receipt of goods into commission — entry in an off-balance-sheet account,
- sale of goods to the customer — revenue and, at the same time, a payable to the principal,
- settlement with the principal — the payable is reduced by the agreed commission,
- commission — the commissionaire’s revenue and the basis for their VAT.
The same discipline applies to any flow that is not fully yours, such as the accounting of payment gateways where customers’ money passes through your account.
How does the principal account for goods handed over?
The principal does not remove the goods from their books — they stay in inventory, usually on a dedicated sub-account labelled “goods handed over on commission”. The principal no longer holds them physically, but still owns them.
The principal recognises the sales revenue only when the commissionaire sells the goods to the final customer, and records the commission as a selling cost. Recognising revenue too early — at hand-over rather than at the real sale — is a frequent mistake.
What is the difference between commission and a consignment warehouse?
A consignment warehouse is a store at a non-owner — the supplier’s goods physically held at the buyer (or an agent or commissionaire), remaining the supplier’s property until withdrawal or payment.
The principle is close to commission: until a sale or withdrawal takes place, the goods belong to the original owner and appear only in the other party’s off-balance-sheet records. The difference is mainly the purpose — a consignment warehouse serves smooth supply, while commission is about arranging a sale for a fee.
How does VAT work here?
Because the commissionaire sells in their own name, for VAT purposes they are treated as having acquired the goods and then supplied them to the customer — two separate supplies of goods in a chain, rather than a single service alongside a resale. This mirrors the logic applied to dropshipping and other own-name resales.
The commission is not invoiced as a separate service beside the goods; it is reflected in the pricing between principal and commissionaire. This is exactly where errors in the tax base and the date of supply appear, so the documents are worth setting up carefully. For the country-specific VAT rules, consult a local adviser — see our tax advisory overview.
Where do businesses most often go wrong?
The most common mistake is recording someone else’s goods as your own inventory, which artificially inflates both assets and the cost of goods sold and distorts the profit. The second is the wrong timing of revenue — the principal booking a sale at hand-over instead of at the real sale to the end customer.
The third recurring error is a forgotten or mis-calculated commission, or its incorrect VAT treatment. A clean separation of “what is mine” and “what is someone else’s” is the very foundation of commission-sale accounting.
Do you sell goods on commission or run a consignment warehouse and are not sure how to record it? We will set up your books so they clearly separate your assets from those of others and hold up under audit.
FAQ
Do goods received on commission belong in my inventory?
No. They remain the principal’s property until sold to a third party, so as the commissionaire you record them off-balance-sheet, not as inventory. They would become your asset only if you first bought them from the principal yourself.
What is my taxable revenue in a commission sale?
Your revenue is the commission — the fee for arranging the sale. The price collected from the customer belongs to the principal and creates a payable to them, which you settle after deducting your commission. The full sale proceeds are therefore not the commissionaire’s revenue.
What is the difference between commission and consignment?
In a commission sale you sell someone else’s goods in your own name for a fee. A consignment warehouse is a place where a supplier’s goods are stored at the buyer; they remain the supplier’s property until withdrawal or payment. In both cases the goods are not your balance-sheet asset — the difference is mainly the purpose and the contract.