Consignment Account - Meaning/Definition - SS3 Accounting Past Questions and Answers - page 1
What is a consignment account?
An account used to store personal items
An account used to sell goods on behalf of another party
An account used to receive commission payments
Who retains ownership of the goods in a consignment agreement?
The consignor
The consignee
Both the consignor and the consignee
What is the role of the consignee in a consignment agreement?
To sell the goods on behalf of the consignor
To purchase the goods from the consignor
To provide storage space for the consignor's goods
What is the commission paid to the consignor based on?
The cost of the goods
The sales price of the goods
The amount of time the goods were held in inventory
In which industry are consignment accounts commonly used?
Hospitality
Manufacturing
Retail
What is the difference between a consignor and a consignee in a consignment agreement?
The consignor is the party who sends goods to be sold on their behalf, while the consignee is the party who sells the goods on behalf of the consignor.
Why might a manufacturer or distributor use a consignment account to sell their products?
A manufacturer or distributor might use a consignment account 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.