I am having trouble working our how to handle livestock and produce accounts.
The usual situation in primary production in Australia is that the producer buys and sells livestock and produce through an agent. The agent renders a sales advice for sales made on behalf of the producer, which includes disbursements made on the producer’s behalf (freight etc.). When the producer buys livestock, the agent issues an invoice for the purchase plus other costs involved. Usually the producer has arranged finance through a third party or through the agent. The costs are funded by the finance provider and the proceeds of sales are remitted to the finance provider. If there are surplus funds, these may be remitted to the producer, or may remain as a credit in the finance provider’s account. The producer may need to add funds if the limit of the finance facility is reached. This may be done by payment of the unfunded balance to the agent, or to the finance provider, depending on the arrangement in place. Interest on the facility may be paid directly by the producer, or may be added to the finance balance. The producer may make payments to the finance provider to reduce the funded balance if there are funds available.
How should the finance provider’s and the agent’s account be set up? It seems the finance provider is acting like a bank. I am having problems setting the account up this way, as it doesn’t show up on the balance sheet. If I set it up as a liability account, the invoice transactions can’t be allocated to it.
I am obviously missing something here, and would be most grateful for any help, or feed back from anyone who has managed to work out how to handle this type of situation.