Once the consignee sells the inventory, the consignor can record the sale amount. ![]() The consignee also keeps a percentage of the sale proceeds and pays the consignor a predetermined sales amount. Once the consignee sells the goods, the risk and rewards related to the inventory get transferred. With consignment inventory, the consignor transfers the goods to the consignee, which sells the goods to customers. However, some companies may still choose to convert inventory from one account to another to keep their records organized. Since the risks and rewards of the goods do not transfer due to the transfer, the consignor cannot record the inventory as sold. When it comes to the accounting treatment of consignment inventory, the standards are clear about it. ![]() Other names used for consignment inventory are consignment goods or consignment sales. The consignee also has the option to return any unsold or damaged goods to the consigner. The other party, the consignee, is the company or business that holds the physical inventory. The first party, the consignor, is the company that provides the goods. The dealer, in this case, is only responsible for its distribution or retail operations.Īs mentioned, there are usually two parties involved in the consignment deal. Usually, the risks and rewards associated with consignment inventory remain with the company that owns it.Ĭonsignment inventory is common in industries where companies transfer their goods to the dealer, which distribute or sell them further. ![]() Consignment inventory represents stock legally owned by one company or business but held by another.
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