Answer ID:2848, 9175, 9176, 9177
Consignment stock is an arrangement where physical stock is moved from one business (the Consignor) to another (the Consignee), but stock ownership remains unchanged. Let's start by taking a look at a real-world example.
Fun Co. manufactures toys ranging from $30 to $500. One of their customer's, Tim's Toys, is hesitant to stock the more expensive products. But Fun Co. believes that getting the high-end toys in front of customers will help promote the product line. So, Tim's Toys doesn't want to outright buy the stock but agrees to sell the toys as consignment stock.
From this example, you can see that the consignor's (Fun Co.'s) stock ownership is the crucial aspect of the arrangement. Within AccountRight, you would handle consignment stock a little differently depending on your role in the agreement.
|Consignor||Consignment stock is separated from your normal stock until the consignee notifies you of its sale. You'd then record the sale of the stock.|
|Consignee||Record a purchase for $0.00 to transfer the inventory. When the stock is sold, you'd issue an invoice to the consignor notifying them of the sale and enter a purchase order to record the sale in your own system. Consignment commission will also need to be recorded.|
However, the specifics of how your business handles consignment stock depends on a number of factors, such as:
- the inventory system of your consignment partner,
- terms and conditions agreed upon by both parties, and
- the various models of tracking and ownership transfer used.
Want to learn more?
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