I have a new artist client who sells his paintings through a number of established art galleries on a sale or return basis. In delivering the paintings to the galleries my client suggests a guide price for each painting but the actual price achieved may be more or less than this. The galleries deduct a percentage (ranging from 25% to 40%) from the sales price they achieve and remit my client a cheque for the balance. Often the only paperwork my client receives from the galleries is little more than a compliment slip.
He also sells his paintings direct to customers and has plans to set up his own gallery
in the future, but for now is dependent on these other galleries to show and sell his work.
What is the correct accounting treatment within my client's accounts for the commission the galleries take for selling his paintings? Should this be shown as an expense within the artist's accounts or is his turnover simply the (net) amount he receives from the galleries?
Also, what is the correct sales value to take into account in determining his total output for VAT registration purposes?