Compare the operating models
A fictional shop owns ten scarves and holds six supplier-owned scarves on the same shelf. Its invented consignment agreement requires weekly sold-item reports; unsold scarves can be returned. For owned stock, the shop instead records a purchase and later sells independently.
| Business requirement | Purchase and own | Hold under consignment |
|---|---|---|
| Before a customer sale | Shop owns ten units | Supplier owns six units |
| Supplier relationship | Purchase order and receipt | Owner and agreement link |
| After selling two consigned units | Not an owned purchase movement | Report two sold; four remain in custody |
Work through the chosen model
Create a consignment arrangement with supplier, covered items, reporting period, agreed settlement basis and unsold-return route. Each held quantity identifies its owner. Customer sale lines retain the source so the weekly statement can list the two consigned sales without treating shelf receipt as a purchase.
- Agree the supply relationship
- Receive into the correct owner pool
- Sell and report the supplied source
- Settle or return under the arrangement
Consignment reduces the need to buy these units first but introduces owner reporting and agreement administration. Contract terms and accounting treatment require their own review.
After two consigned sales, owned stock remains ten and supplier-owned stock becomes four. The statement reports two sold units; it is not a statement that the shop purchased all six on receipt. The worksheet selects an ownership pool plus a consignment arrangement.
When the other model fits
The shop buys all six outright and cannot return unsold goods under the supplied agreement. Is consignment still the right model?
Show the worked answer
No. Use the supplied purchase relationship. Shelf location alone never determines consignment.