In consignment sales, the consignee
A) records the merchandise as an asset on its books.
B) records a liability for the merchandise held on consignment.
C) recognizes revenue when it ships merchandise to the consignor.
D) prepares an "account report" for the consignor which shows sales, expenses, and cash receipts.

Question

Quizplus · Accepted Answer

In consignment sales, the consignee does not own the merchandise but holds it for sale on behalf of the consignor. Therefore, the consignee does not record the merchandise as an asset or a liability. Instead, the consignee is responsible for selling the merchandise and must report sales activity to the consignor, typically through an "account report" that details sales, expenses, and cash receipts. Revenue is recognized by the consignee upon the actual sale of the merchandise to a third party, not when it is shipped to the consignor.

In Consignment Sales, the Consignee