How do I handle the return of a consignment sale where the consignor has already been paid?
I have a small consignment art gallery (65% artist/35% gallery). We have a "no returns" policy but a special situation occurred where I decided to accept the return. The original sale was $1000. I recorded the bank deposit and split $650 to Accounts Payable: Artist John Doe and $350 to Commission Income: Artist John Doe. At the end of the month, I sent the artist a check for $650 and reversed the AP so payables for that artist were now $0. My confusion is how to handle the return. When the buyer brought the painting back, I issued a refund for $1000 to the credit card. The artist agreed with the decision to accept the return and reimbursed me the $650 he had been sent. (A few weeks later, the painting was sold again.) How do I handle the original return and the return of the consignment payment? I can reduce the Commission Income but what do I do about the check written to me by the artist? It doesn’t go to AP does it? Thanks