LEARNING ADVANCEMENT REVIEW CENTER

RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.

SAMPALOC, MANILA CONSIGNMENT
CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364

ADVANCED FINANCIAL ACCOUNTING AND REPORTING I.Y. BAGAYAO/A. TANG/B. VILLALUZ

Accounting for consignment arrangements under PFRS15

• An entity shall not recognize revenue upon delivery of a product to another party if the delivered product is held on
consignment
• Indicators of consignment (not limited to):
o the product is controlled by the entity until a specified event occurs, such as the sale of the product to a customer of
the dealer or until a specified period expires
o the entity is able to require the return of the product or transfer the product to a third party (such as another dealer);
and
o the dealer does not have an unconditional obligation to pay for the product (although it might be required to pay a
deposit)

Example:
On December 1, 2020, ABC Company (consignor) consigned 50 units of merchandise to XYZ Company (consignee) costing P5,000
each to be sold for P7,000 each. Commission of 10% on the selling price will be given to XYZ for every unit sold. Freight charges
incurred by ABC to deliver the units to XYZ amounted to P2,000. On December 31, 2020, XYZ reported the sale of 10 units of
merchandise and remitted the required amount to ABC.

1. How much is the cost of sales to be reported by ABC in relation to the consignment arrangement?
2. How much is the sales revenue to be reported by ABC in relation to the consignment arrangement?
3. How much is the ending inventory to be reported by ABC as of December 31, 2020?
4. How much is the amount remitted by XYZ?
5. How much is the net income of ABC in relation to the consignment arrangement?

Manufacturing cost per unit 5,000.00

Freight to consignee per unit (2,000/50) 40.00
Total cost per unit 5,040.00
# of units sold 10.00
Cost of sales 50,400.00 (1)

# of units sold 10.00

Selling price per unit 7,000.00
Sales revenue 70,000.00 (2)

Total cost per unit 5,040.00

# of units unsold (50 - 10) 40.00
Cost of ending inventory 201,600.00 (3)
 LEARNING ADVANCEMENT REVIEW CENTER
RM 413 DONA AMPARO BUILDING ESPANA BOULEVARD CORNER G. TOLENTINO ST.
SAMPALOC, MANILA CONSIGNMENT
CONTACT # (02) 244 6342 / 0915 537 1189 / 0943 595 5364

ADVANCED FINANCIAL ACCOUNTING AND REPORTING I.Y. BAGAYAO/A. TANG/B. VILLALUZ

Total sales revenue 70,000.00

10% commission (7,000.00)
Freight to consignee if paid by consignee -
Net remittance 63,000.00 (4)

Sales revenue 70,000.00

Cost of sales (50,400.00)
Gross profit 19,600.00
Commission expense (7,000.00)
Net profit 12,600.00 (5)