 Consignment is an arrangement where there is a

physical transfer of goods by the owner

(consignor) to another party who is to act as
sales agent (consignee, factor, or commission
merchant), legal title being retained by the owner
until their sale.

 From the legal point of view the transfer of goods

represents a bailment, the consignee having the
possession of the goods for the purpose of sale
as specified in the agreement between the
consignor and the consignee.
1. The consignment sales may be the only way to which a
wider marketing area can be secured by a producer,
manufacturer, or distributor, particularly when
a. the goods are just being introduced and the demand
for the product is unknown or uncertain;
b. sales in the past have proven unprofitable to the
dealer;
c. the goods are costly requiring large investment on the
part of the dealer if purchased; and
d. price fluctuation or product perishability is such that
the dealer will agree to sell goods only if the risk of
loss is borne by another.
2. Certain risks are avoided by the consignor
3. Selling specialists may be obtained by the consignor
4. The retail selling price of consigned goods can be
controlled by the consignor who still owns the goods.
The consignee may favor the acquisition of
goods by consignment instead of by purchase
for the following reasons:

1. The consignee is protected from the risk of

failure to move the product or its sales at a
loss.
2. The risks of physical deterioration as well as
of price fluctuation are avoided.
3. Working capital requirements are reduced,
the cost of consignment inventory being
carried by the consignor.
1. The consignee is entitled to reimbursement
for necessary expenditures on consigned
goods and also to compensation for sales.
2. The consignee has the right to offer the
customary warranties on goods that are
sold, the consignor being bound by the
terms of such warranties.
1. The consignee must protect the goods of his principal
in a reasonable and prudent manner consistent with
the nature of goods and the circumstances of the
consignment.
2. The consignee must sell the consigned goods at the
price that is authorized or; in the absence of a set
price, at a price that will best satisfy the interests of
his principal.
3. The consignee must keep the goods of the consignor
apart from other merchandise.
4. The consignee must report regularly on the progress
of consignment sales.

◦ Account sales – the report that is rendered by the

consignee
 ACCOUNT SALES
Sales for the account of
__________________________________________
Address: ______________________________________________________
Below please find account sales of _____________
_____________________

Sold by

Date Explanation Amount

 Presentation prepared by:
Jennifer M. Perez
Reference: Advanced Accounting Vol.1 2005 edition
by Ma. Violeta V. Vicente