I have been given the following statement to prepare the general journal entry to make the necessary adjustment for end of period.


"The owner of Rayngia limited signed an agreement worth $300 in April 2008
with a supplier to set up a special display in his shop. The $300 is due to be
paid by the supplier to Rayngia on the 30th of June 2008. The inventory will
be supplied on consignment and the display will showcase wines which have
a cost of $3,000. The display was set up in the middle of June in time for the
mid year sales and sales of these showcase wines totalled $1,600 for the
month ending 30th June 2008."

I understand that consignment stock is not owned by the consignee therefore should not be reported as an asset. But am still very confused by how to account for the stock and the sales of consignment stock. Any help would be greatly appreciated.

Record the consignor's inventory at zero cost. This will allow you to sell the consigned inventory and track the quantity on hand, without the inventory value being on your balance sheet.

Create an inventory part item for the items being sold, selecting a liability account (amount due consignor) instead of an income account.

Then, pay the consignor (vendor) the liability balance (using the same item; this should reduce the liability). On the second line use a negative amount for the fee you are charging, directing the amount to an income account.

Source: Richard Torian (http://www.AccountingForBusinessesOnline.com/) on the Intuit Community Board (http://community.intuit.com/posts/consignment-inventory-how-do-i-account-for-it-when-it-comes-in-to-store).