Question:
Describe a consignment sale. When does a consignor recognize revenue for a consignment sale?
Answer:
Sometimes a company arranges for another company to sell its product under consignment. The
“consignor” physically transfers the goods to the other company (the consignee), but the consignor retains
legal title. If the consignee can’t find a buyer within an agreed-upon time, the consignee returns the goods
to the consignor. However, if a buyer is found, the consignee remits the selling price (less commission
and approved expenses) to the consignor.
Because the consignor retains the risks and rewards of ownership of the product and title does not pass to
the consignee, the consignor does not record revenue (and related costs) until the consignee sells the
goods and title passes to the eventual customer.
Describe a consignment sale. When does a consignor recognize revenue for a consignment sale?
Answer:
Sometimes a company arranges for another company to sell its product under consignment. The
“consignor” physically transfers the goods to the other company (the consignee), but the consignor retains
legal title. If the consignee can’t find a buyer within an agreed-upon time, the consignee returns the goods
to the consignor. However, if a buyer is found, the consignee remits the selling price (less commission
and approved expenses) to the consignor.
Because the consignor retains the risks and rewards of ownership of the product and title does not pass to
the consignee, the consignor does not record revenue (and related costs) until the consignee sells the
goods and title passes to the eventual customer.
