Consignment stocks can be received with reference to a purchase order. The consignment prices for the vendor must be maintained in the purchase info record. The price maintained here is required for PO. When consignment stock is received, it is not valuated as it is not the companys stock. It remains physically in the store, but is the property of the vendor. Therefore on receipt there is no implication on books of account. 1.1.2 Issue of Consignment stock Consignment Sales/Issue refers to sales of articles from the vendors consignment stock. Since the articles are located in the premises of the company they will be managed by the company, will not be valuated in the companys book of accounts. In case of vendors consignment the vendors account will be debited only after the articles are sold. Consignment sales will also be carried out at the POS system for end-consumers. When articles are sold from the consignment stock at the POS, it posts a negative quantity in the unrestricted-use stock of the article. The sales revenue is booked. The daily sales entry, based on actual selling price, shall be passed together for entire sales for that store.
1.1.3 Transferring consignment stock to own stock
The consignment stock is then transferred to unrestricted use stock to the extent of the negative quantity posted unrestricted-use stock. Accounting entry: Cost of Goods Sold a/c Dr To Liability from consignment stock
1.1.4 Settling Consignment Liabilities
The settlement can be handled in two ways; Consignment to own Removing material from consignment stores or transferring material to companys own stock results in liabilities towards the vendor. Retailer settle these liabilities at regular intervals. Consignment materials invoices are verified without the vendor issuing an invoice, as the vendor company is unable to track withdrawals directly. The vendor can only manage its consignment stock by taking deliveries and payments into account. Retailer can initiate payment for consignment withdrawals using the Logistics Invoice Verification application component. 1.1.5 After Sales Based on Sales documents, system will create Liability automatically in the system. The vendor pays only a commission for the sales made at the POS for the consignment articles. Removal of articles from consignment stores and transferring it to companys stock, results in a liabilities towards the vendor. The settlement may be performed periodically in the background. The following documents can be involved: Invoices, credit memos. The purchase price has to be checked with the sales price for the article, and ensure negotiated margins are not breached. Accounting entry: