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Setting up your MYOB software to track consignment stock usually requires assistance from an accounting advisor. The example we'll use is a company who chooses not to purchase their stock outright, but instead sells stock provided by another company on a consignment basis.
This article is provided for guidance only - it might not be suitable for your business requirements. If you need clarification, check with your accounting advisor or post your question below.
What is consignment stock?
Consignment stock, by definition, is a marketing arrangement whereby physical control of merchandise but not title, is transferred from one business (the Consignor) to another (the Consignee). The title to the goods remains that of the consignor until such a time as the goods are sold by the consignee. For this reason, consignment stock is typically shown as an asset in the consignor's books until the consignee sells the goods. At this point, a sale occurs and the goods pass title.
You'll need to create an asset account to track the value of your consignment stock (Accounts > Accounts List > Asset tab > New).
Here's an example:
Each line of inventory on consignment will require its own item number. It's a good idea to use the same item number as the existing item, but preceed it with the letter "C" to identify it as consignment stock.
To create items, go to Inventory > Item List > New.
Select the options I Buy This Item, I Sell This Item and I Inventory This Item. For the Asset Account for Item Inventory, select the asset account created above.
Here's an example:
Prepare a purchase for consignment stock received
Prepare a purchase order for the consignment stock items received. Purchase the consignment inventory at $0. You do not hold title to the goods so they should not be reflected in the balance sheet. Refer to our example below.
In this example, "Consignor" would be replaced with the actual supplier of the product, and Consignee would be your company.
The $0 invoice will place inventory into stock with no value. This will mean that no Cost of Sales figure will be generated at the time the goods are sold. We will be able to track the quantities of consignment stock on hand.
Selling the consignment stock
When selling the consignment stock items, use an item sales invoice. Make sure you use the same consignment stock item number.
Record a purchase bill
At the end of the month (or as per your agreement with the consignor), notify the consignor of the stock that you have sold for the month. You should then be issued with a sales invoice from the consignor.
Create a service or professional purchase order to record the purchase of the consignment stock. See our example below.
Note that whilst you could also use a miscellaneous type purchase order, you should take into account that this type cannot be printed.
The account number used should be the linked Cost of Sales Account set up in the Item Information. The Cost of Sales Account is used because title passes only once the goods have been sold. As the goods are sold, they should immediately be expensed to the relevant Cost of Sales Account.
Entering opening consignment stock on hand
Create a purchase bill as detailed above. Once again, enter the purchase price at $0. The date entered on the purchase bill will be the conversion date.
No figure for consignment stock held will appear in the Balance Sheet. Consignment stock remains the property of the consignor until time of sale. As a consequence, consignment stock would never be shown as an asset in the consignee's books.
This method will produce a cost of sales figure in the profit and loss statement, but it will not produce a cost of sales figure in any of the Analyse Sales reports. Analyse Sales reports obtain their information from the cost of sales figure generated when you record a sale. As a $0 cost of sales figure is being generated at the time of recording, these reports are unavailable, however, the correct cost of sales figure will be produced in the Profit and Loss report.
Feel free to comment or ask any further queries you may have on the topic.
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