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

Which of the following is most true regarding consignment arrangements?

Ownership of consigned goods transfers to the consignee upon delivery.

Goods held on consignment remain the property of the consignor until sold.

Goods held on consignment are recorded as inventory by the consignee.

The consignee recognizes revenue when the goods are received.

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Verified step by step guidance

Understand the concept of consignment arrangements: In a consignment arrangement, the consignor (owner of the goods) sends goods to the consignee (agent or seller) to sell on their behalf. Ownership of the goods remains with the consignor until the goods are sold.

Clarify the ownership aspect: Goods held on consignment are not transferred to the consignee upon delivery. The consignee acts as an agent and does not own the goods; they are responsible for selling the goods on behalf of the consignor.

Examine inventory recording: Since the consignee does not own the goods, they do not record the consigned goods as inventory in their accounting records. The consignor continues to record the goods as inventory until they are sold.

Revenue recognition by the consignee: The consignee does not recognize revenue when the goods are received. Revenue is recognized only when the goods are sold to a third party, as the consignee earns a commission or fee for facilitating the sale.

Conclude the correct statement: Based on the principles of consignment arrangements, the correct statement is that goods held on consignment remain the property of the consignor until sold.