Accounting for

Consignment
ACCOUNTING FOR SPECIAL TRANSACTIONS – ACCTG 107
Learning Objectives
• Define a consignment arrangement.
• Apply the principles of PFRS 15 in recognizing revenue from a
consignment arrangement.

ACCOUNTING FOR SPECIAL TRANSACTIONS (Advanced Accounting 1) - (by: MILLAN)

What is Consignment Accounting?

• Consignment accounting is a type of business arrangement in which

one person send goods to another person for sale on his behalf and the
person who sends goods is called consignor and another person who
receives the goods is called consignee, where consignee sells the goods
on behalf of consignor on consideration of certain percentage on sale.
What is Consignment Accounting?
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. ACCOUNTING FOR SPECIAL TRANSACTIONS (Advanced Accounting 1) - (by: MILLAN)
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.
⮚ The consignee recognizes revenue at the commission or fee to which it is
entitled.

ACCOUNTING FOR SPECIAL TRANSACTIONS (Advanced Accounting 1) - (by: MILLAN)

Thankyou Future CPA’s!!