Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Financial Accounting

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

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Multiple Choice

Goods on consignment are:

Recorded as inventory by both consignor and consignee

Excluded from inventory by both consignor and consignee

Included in the inventory of the consignee upon receipt

Included in the inventory of the consignor until sold

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Verified step by step guidance

Understand the concept of consignment: Consignment refers to an arrangement where the consignor (owner of the goods) sends goods to the consignee (agent) to sell on their behalf. Ownership of the goods remains with the consignor until the goods are sold.

Clarify the accounting treatment for inventory: Since the consignor retains ownership of the goods, the goods on consignment should be recorded as inventory in the books of the consignor, not the consignee.

Recognize the consignee's role: The consignee does not record the goods as inventory because they do not own the goods. Instead, they may record a liability or memorandum entry to track the consigned goods.

Understand the timing of inventory adjustment: The consignor will remove the goods from inventory and recognize revenue only when the consignee sells the goods to a third party.

Apply the correct answer: Based on the principles above, goods on consignment are included in the inventory of the consignor until sold, as ownership remains with the consignor during the consignment period.