Which revenue recognition criterion is not satisfied when goods are sold on consignment?
A)The stage of completion can be reliably measured.
B)The transfer of risks and rewards of ownership.
C)Costs incurred can be reliably measured.
D)Managerial control over the goods sold.

Question

Quizplus · Accepted Answer

The transfer of risks and rewards of ownership is not satisfied when goods are sold on consignment. In a consignment sale, the ownership of the goods remains with the consignor until they are sold to a third party. As a result, the consignor bears the risks and rewards of ownership until the goods are actually sold. Therefore, revenue cannot be recognized until the goods are sold and ownership is transferred to the customer.

Which Revenue Recognition Criterion Is Not Satisfied When Goods Are