What it means
Because the consignor owns the goods, it cannot know what has been sold unless the consignee tells it. The consignment sale report is that line of communication, and it normally follows a set format and timetable agreed in the contract.
A good report lists each item or product code sold, the date, quantity, selling price and the total. It then shows the commission, any permitted costs such as advertising or packaging, and the net amount remitted.
It should also show the stock position. Many reports include opening stock, goods received, goods sold, returns and closing stock, so that the consignor can reconcile the quantities as well as the money.
For the consignor, the report is the trigger for recognising revenue. Only when the consignee reports that goods have been sold to the end customer does the consignor record the sale, the commission expense and the reduction in inventory.
Controls are important because the consignor relies on someone else's information. Contracts often give the consignor the right to inspect records or count the stock, and some require reports to be signed by a manager.
Reports can be paper, spreadsheets or exports from a point-of-sale system, and modern systems often share data automatically. Whatever the format, the key is that it is complete, timely and traceable back to individual sales.
In practice
Real-world examples.
Example
A craft cooperative sends monthly sale reports to the 20 artists whose work it stocks. Each artist sees what sold, the commission charged and the amount paid, and uses it for their own tax records. The cooperative's treasurer keeps copies for its own audit.
Example
A boutique hotel shop sells local produce on consignment. At month end it produces a report showing units sold of each item, retail price, the 25% commission and a net payment to each supplier. The shop's accountant checks the report against the till records before payment is made. Any query is sent back before the money is released, which prevents overpayments from being chased later.
Example
A distributor reports sales of a supplier's tools to hardware shops. The supplier matches the report to its stock records and invoices the shops for the items they have sold. Items still in stock are not invoiced until they sell. The supplier then raises a single monthly statement covering all the shops.
Formula
Calculation
Net remittance = Gross sales - Commission - Authorised expenses
A gallery sells four paintings on consignment at $2,000 each, so gross sales are 4 x $2,000 = $8,000. The agreed commission is 30%, which is $8,000 x 0.30 = $2,400, and framing costs of $200 were authorised in advance. Net remittance = $8,000 - $2,400 - $200 = $5,400, which the artist can compare with the payment received. The report also shows that one painting remains unsold, and that stays on the gallery wall as the artist's property.Case study
Seen in the real world.
Greystone Art Gallery is an illustrative, fictional gallery that sells paintings for around thirty artists on consignment. It once paid artists whenever a sale happened, with no formal reports, and several artists complained that they did not know what was owed.
The gallery manager introduced a standard consignment sale report, issued by the fifth day of each month. It listed each painting sold, the buyer's invoice number, the price, the 35% commission, framing costs and the net payment.
In this illustrative result, disagreements about payments dropped to almost zero, and artists were more willing to consign larger works. The artists also used the reports for their own accounting, and the gallery's accountant used the same data to reconcile stock and cash. The manager also began adding a short note on market feedback, which several artists said they valued highly, and which strengthened their loyalty to the gallery. The staff also noticed that the monthly routine made the end-of-month close quicker, because every sale was already documented before the accountant asked for it.
Watch out
Common mistakes.
- Issuing reports late, which delays the consignor's revenue recognition and cash.
- Leaving out the stock position, so the consignor cannot reconcile quantities.
- Deducting expenses that the contract does not authorise, which leads to disputes and strained relationships.
Questions
People also ask.
What is another name for a consignment sale report?
It is often called an account sales, particularly in older or international trade settings.
Who prepares it?
The consignee prepares it, because it has the sales information, and the consignor reviews it. Reports should be signed and dated so they can be traced. The consignor files each report with the matching stock record and bank receipt.
Does the report replace an invoice?
No, it is a statement of what was sold and what is owed, and the contract usually determines whether a separate invoice is also needed. Some businesses combine the two documents into one. Where a separate invoice is used, it should refer to the report number.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%