Difference Between Consignment and Sale
Consignment means that the whole seller allows the retailer to sell their goods without owning them. The goods still belong to the consignor (whole seller or manufacture) but they are place in the consignee’s location.
The consignee will require to pay for the cost of goods only after they are sold. If they are not sold, the goods still belong to the consignor. They will responsible for any damage and obsolete. If you want to read more about consignment, please follow this link.
Sale is the inflow of economic benefit into the company due to business activities. The company sells its own goods or service to generate profit.
The company purchases the goods and resells them to make a profit. The cash receives from selling goods will consider as sales.
Difference Between Consignment and Sales
|The consignor is the owner of the goods until they are sold. The seller just sells the goods on behalf of the consignor.
|The seller is the owner of goods. Ownership transfer when company purchases goods from the supplier.
|It is the relationship between principal and agent.
|The relationship is seller and buyer.
|The seller will not record expenses as it does not record the inventory.
|The seller will reclass inventory from assets to expense (cost of goods sold) in income statement.
|Consignor is still responsible for any risk to the goods.
|Seller will responsible for the goods as they belong to them.
|Return of Goods
|The consignee can return the goods to the consignor when they are not able to sell the goods.
|Sellers cannot return goods to suppliers even they are not able to sell.
|The consignee needs to provide a detailed selling statement to the consignor to ensure transparency.
|The seller does not require to update to the supplier regarding the sales.
|Unsold inventory belongs to the consignor.
|Unsold inventory belongs to the seller.
|The consignor will provide a commission for each goods sold.
|Seller will set the selling price which is higher than the cost of goods.