1.

Consignment Stock

1.1.1 Consignment Receipt

Consignment stocks can be received with reference to a purchase order. The
consignment prices for the vendor must be maintained in the purchase info record.
The price maintained here is required for PO. When consignment stock is received,
it is not valuated as it is not the companys stock. It remains physically in the store,
but is the property of the vendor. Therefore on receipt there is no implication on
books of account.
1.1.2 Issue of Consignment stock
Consignment Sales/Issue refers to sales of articles from the vendors consignment
stock. Since the articles are located in the premises of the company they will be
managed by the company, will not be valuated in the companys book of accounts.
In case of vendors consignment the vendors account will be debited only after the
articles are sold. Consignment sales will also be carried out at the POS system for
end-consumers.
When articles are sold from the consignment stock at the POS, it posts a negative
quantity in the unrestricted-use stock of the article. The sales revenue is booked.
The daily sales entry, based on actual selling price, shall be passed together for
entire sales for that store.

1.1.3 Transferring consignment stock to own stock

The consignment stock is then transferred to unrestricted use stock to the extent of
the negative quantity posted unrestricted-use stock. Accounting entry:
Cost of Goods Sold a/c Dr
To Liability from consignment stock
1.1.4 Settling Consignment Liabilities
The settlement can be handled in two ways;
Consignment to own
Removing material from consignment stores or transferring material to companys own

stock results in liabilities towards the vendor. Retailer settle these liabilities at regular
intervals.
Consignment materials invoices are verified without the vendor issuing an invoice, as
the vendor company is unable to track withdrawals directly. The vendor can only
manage its consignment stock by taking deliveries and payments into account.
Retailer can initiate payment for consignment withdrawals using the Logistics Invoice
Verification application component.
1.1.5 After Sales
Based on Sales documents, system will create Liability automatically in the system.
The vendor pays only a commission for the sales made at the POS for the consignment
articles. Removal of articles from consignment stores and transferring it to companys
stock, results in a liabilities towards the vendor. The settlement may be performed
periodically in the background. The following documents can be involved: Invoices,
credit memos. The purchase price has to be checked with the sales price for the article,
and ensure negotiated margins are not breached.
Accounting entry:

Liability from consignment

To vendor a/c