When does a consignor recognize revenue in a consignment relationship?
A consignor does not recognize revenue when the goods are transferred to a consignee. Rather, the consignor would only recognize revenue when the goods are sold by the consignee to a 3rd party (i.e. customer). When the consignee sells the goods to a 3rd party, that is the point at which the consignee can record commission expense for selling the goods on behalf on the consignor.
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Who is the consignee in a consignment relationship?
The consignee is the acting agent who is selling inventory items on behalf of the principal (consignor). The consignee does not assume the risk of the inventory and will be compensated on a commission basis.
Who is the consignor in a consignment relationship?
The consignor is a person who sends goods to an agent (consignee) to be sold on their behalf. The consignor retains ownership of the inventory even though it is physically located at the consignees warehouse. Additionally, the consignor cannot recognize revenue until the consignee sells the item to a 3rd party customer.
Who owns the inventory in a consignment relationship?
The consignor (the principal) will retain control of the inventory throughout the duration of a consignment sale relationship. The consignor sends the goods to the consignee, but the consignee never actually obtains title or control of the goods. The benefit of this relationship for the consignee is that they can return unsold goods to the […]