In accounting for sales on consignment,sales revenue and the related cost of goods sold should be recognized by the
A) consignor when the goods are shipped to the consignee.
B) consignee when the goods are shipped to the third party.
C) consignor when notification is received the consignee has sold the goods.
D) consignee when cash is received from the customer.

Question

Quizplus · Accepted Answer

In accounting for sales on consignment, the consignor should recognize sales revenue and the related cost of goods sold when it receives notification from the consignee that the goods have been sold to a third party. This is because until the goods are sold, the consignor still maintains ownership of the goods and bears the risk of loss or damage. Therefore, revenue should not be recognized until the goods are sold and the consignee has fulfilled its obligation to the consignor. The consignee should not recognize sales revenue or cost of goods sold because it has not yet earned the right to revenue as it is acting as an agent on behalf of the consignor.

In Accounting for Sales on Consignment,sales Revenue and the Related