Does any one have experience with setting up accounts for partnership with customer where you provide the hardware and they are providing software instead of the customer paying for the hardware we are to receive a percentage of the sales. So my company will remain the owners of the hardware. I am not sure how to set this asset up and account for COGS.
It depends on your reporting and inventory tracking requirements. But, if I understand your requirements correctly, you are technically setting up cosignment contract with your customer. I would set-up the hardware items normally as Inventory items and record the sale when you receive the commission on the sale.
It is little more complex than a cosignment contract. The partnership with the products never exchanges ownership between the two companies. Meaning we will continue to own and maintenance the hardware while the other company with maintain the software and gain end customer sales. My company will be provided a percentage of the revenue from the sale for the partnership not for the product. What I am not sure about is how we should account for our cost in developing the hardware.
Development costs are R&D expense, assuming you are developing the hardware for stocking it and not a one off retail thing. A one off, built on customer demand, would be COGS
As I read this, the other company makes sales of both the hardware and software, and you make the hardware.
If you make and stock the hardware that is inventory.
The other company must be telling you when they make a sale which includes your hardware, so that is what it is in your books. You sell the hardware to the other company for the agreed upon price.
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