Consignment Account - Meaning/Definition - SS3 Accounting Lesson Note

A consignment account is a type of account that is used when one party (the consignor) sends goods to another party (the consignee) to be sold on their behalf. The consignee will then sell the goods and pay the consignor a percentage of the sales price, known as a commission.

In a consignment agreement, the consignor retains ownership of the goods until they are sold. The consignee is responsible for storing and displaying the goods, as well as marketing and selling them to customers. Once a sale is made, the consignee will deduct their commission and remit the remaining proceeds to the consignor.

Consignment accounts are commonly used in industries such as retail, where manufacturers or distributors may send products to retail stores on consignment. This allows the manufacturer or distributor to showcase their products to a wider audience without taking on the risk of unsold inventory. It also allows the retail store to offer a wider variety of products without having to purchase inventory upfront.