Consignment is taking possession of and selling merchandise (inventory) that belongs to others (typically for a share of the sales proceeds).
‘Accounting’ is the act of keeping track of things.
‘Consignment Inventory Accounting’ is knowing all that is required to know about merchandise ‘on consignment’.
What is there to know?
- What is the item?
- How is it identified (item ID)?
- Who owns it?
- What is the owner’s contact information?
- What are its defining characteristics (description)?
- Where is it located (stored)?
- What is the selling price?
- How long is it to remain ‘on consignment’?
- What is to be done with the item if if doesn’t sell in the allotted time?
- What is the allotted time?
- How is the item to be sold? (online? physical store? auction?)
- What percentage of the sales proceeds is the owner to receive?
- What fees are applicable?
- How, when and how will the owner be paid?
All of these questions are answered by accounting for all information related to consignment inventory. Who are the parties? What is their relationship? What is the agreement? What items are being consigned? For how long? What happens to unsold items at the end of the consignment period?
Consignment inventory accounting is the recording of all information and transactions related to selling consigned merchandise for others.