Consignment Sales
Consignment Sales
SALES
Consignment Arrangements
• Under a consignment arrangement, an entity (called the ‘consignor’)
delivers goods to another party (called the ‘consignee’) who
undertakes to sell the goods to end customers on behalf of the
consignor.
• The consignor recognizes revenue only when the consignee sells the
consigned goods to end customers.
• Consigned goods are included in the consignor’s inventory until they
are sold to the end customer.
• Freight and other incidental costs of transferring consigned goods to
the consignee (e.g., transportation and insurance) form part of the
cost of the consigned goods.
Revenue Recognition
• When the consigned goods are sold to end customers, The consignor
recognizes revenue at the gross amount of consideration, i.e., the sale
price agreed with the consignee.
XYZ, Inc. sells consigned goods costing P55,000 for P100,000. ABC Co. is not notified of
the sale. ABC Co. - Consignor XYZ, Inc. - Consignee
No Entry Cash 100,000
Commission income 20,000
Payable to ABC Co. 80,000
XYZ, Inc. makes the weekly remittance of sale proceeds, net of commission, to ABC Co.
ABC Co. - Consignor XYZ, Inc. - Consignee
Cash 80,000 Payable to ABC Co. 80,000
Commission Expense 20,000 Cash 80,000
Revenue 100,000