Dictionary / Consignment
What does Consignment mean in accounting?
Quick definition
GeneralGoods shipped for future sale; title remaining with shipper, to be sold for the account of the shipper. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Scarves leave, title stays with you
You run a knitwear studio. On April 3 you deliver 20 merino scarves (your cost $28 each, $560) to a shop on consignment to sell for your account. Title stays with you, so do not invoice the shop or record a sale that day. Leave the $560 in inventory, or move it to a consignment inventory account so you can see it is off-site. Record sales and cost of sales only when the shop reports which scarves sold.
A planter on your shelf is not your stock
You run a home-goods shop. On October 9, a potter leaves 16 hand-thrown planters (retail $48 each) for you to sell at a 35% commission. You do not own them, so do not add them to inventory or enter a bill. When you sell one for $48 on October 22, skip cost of sales from your stock; you owe the potter $31.20 and keep $16.80 as commission income. Track the potter's planters on a consignment log, not the balance sheet.
Why it matters
Consignment is a shipment for later sale where title stays with the shipper until a customer buys. You will not post this most months unless you regularly place stock with another shop or take other people's goods to sell; it shows up when merchandise leaves without a wholesale invoice, or arrives without a purchase. Book a sale when you ship, or put someone else's goods on your inventory, and both the income statement and the balance sheet are wrong. Keep title with the shipper until sold, then record income and cost of sales only for the units that actually sold.
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What is Consignment in bookkeeping?
Goods shipped for future sale; title remaining with shipper, to be sold for the account of the shipper.
When should I use Consignment?
Use Consignment when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Consignment?
Consignment is used for consignment entries, while C&F covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.