Accounting for Consignment Sale

Abstract

Consignment means that the person or business that is the owner, called the consignor, sends goods on consignment to another person or business. Who acts as a representative to sell the goods, which is called a consignor. When sending goods for consignment, the ownership of the goods remains with the consignor. And products sent for consignment are considered the consignor's remaining inventory until the products can be sold. The consignee will be responsible for taking care of the product. and will receive compensation as agreed, usually calculated at a percentage of sales.

Accounting method for the consignee side when receiving the goods from the consignor. The consignee will record his memories in a general journal. or record the memory in the ledger by collecting evidence about the received products. and the consignee will open a consignment account (consignment-in account) This consignment account has the characteristics of a debtor account and a payable account. To record various expenses paid by the consignee before selling the consignment. Charging commission from consignment sales and send the remaining money to the consignor The consignment account will not have a balance when the consignor sends money to the consignor along with the sales report.

Accounting methods for consignors Depending on the need to display items regarding merchandise sales. Cost of goods sent for consignment and expenses on consignment goods will be shown separately from normal sales. or combined with the normal sales of the business It is also classified according to the continuous inventory accounting system (perpetual inventory system) or according to the inventory accounting system at the end of the period (periodic inventory system).