ACCT 110 Lecture Notes - Lecture 6: Santa Barbara City College, Consignee, Consignor
Document Summary
A contract under which one entity bills a customer for a product, but retains physical possession of the product until it is transferred to the customer at some point in the future. May occur when the purchasing company has limited available space for the product, delays in their production schedule, more than sufficient inventory in its distribution channel. Must meet 4 criteria to establish transfer of control: The reason to hold the inventory must be substantive. The product must be identified separately and belong to the customer. The product must be ready to ship. The company cannot use the product nor sell it to another customer. Amounts collected on behalf of the principal are not revenue of the agent; revenue for the agent is the amount of commission it receives. The principal recognizes revenue when the goods and services are sold to a third party.
