Consigned goods

1. Consignment contract
--> Consignor sends goods to consignee
--> Consignor continues to own consigned goods

2. Physical location of consigned goods
--> Consigned goods are located in the warehouse of consignee

3. Ownership of consigned goods
--> Ownership of consigned goods belongs to consignor

4. Inventory counting
--> Consignor should include consigned goods in the inventory
--> even if consigned goods are currently located in the warehouse of consignee

5. Consignee should exclude consigned goods from the inventory
--> even if consigned goods are currently located in the warehouse of consignee

6. Example 1
On December 20, 2011
--> Entity A sent 200 units of its products to Entity B for consignment sales

On December 31, 2011
-->Entity A counted 500 units of its products in their warehouses

What is the number of units to be reported as Entity A's inventory at December 31, 2011?
Answer: 700 units (500 units on hand + 200 units of consigned goods)

7. Example 2
On December 20, 2011
--> Entity A sent 200 units of its products to Entity B for consignment sales

On December 31, 2011
--> Entity B counted 500 units of products in their warehouses, including consigned goods

What is the number of units to be reported as Entity B's inventory at December 31, 2011?
Answer: 300 units (500 units on hand - 200 units of consigned goods)