What is consignment stock?
- By Book Keeping Pros
- Sources checked 16 Oct 2026
Definition
Consignment stock is goods that a supplier, called the consignor, places with another business, the consignee, for the consignee to sell for it. The agreement between them usually sets out how sales are reported and paid for and what happens to unsold goods. Whose inventory the goods are, and how each side records them, depends on that agreement.
Consignment changes the usual order of buying stock. Normally a retailer buys goods, owes the supplier for them and then sells them. With consignment the goods reach the consignee's shelves first, and money usually changes hands only after a customer buys. Until then, the business holding the goods may not be the one that owns them; that depends on the agreement.
That makes separate records important on both sides. The consignee needs to know what it received, from whom and under which agreement, what has sold and what is still on hand, and to keep consigned goods apart from stock it bought outright, both on the shelves and in a stocktake. The consignor needs a matching record of what it sent out, what each consignee has reported as sold and what has come back.
Whose inventory consigned goods are, and how a sale, a commission or a return is recorded on each side, depends on the agreement and is a question for your accountant. Whether a particular arrangement counts as a commercial consignment under personal property securities law is a legal question.
In Australia
The Personal Property Securities Register (PPSR) explains that a consignment has traditionally meant the owner of goods handing them to someone else, who then sells them for the owner. It says the PPS Act treats a consignment as a commercial consignment where the consignor retains an interest in the goods after handing them over, the goods were handed over so they could be sold, leased or otherwise disposed of, and dealing in goods of that kind is part of the ordinary business of both the consignor and the consignee.
According to the PPSR, a commercial consignment counts as a security interest even where it would not fit the standard definition of one under the PPS Act. It says the commercial consignment rule does not cover goods handed to an auctioneer for sale, or goods handed to a consignee that its creditors generally know sells or leases other people's goods.
Worked example
| Item | Received (units) | Sold (units) | Returned (units) | On hand at month end (units) |
|---|---|---|---|---|
| Ceramic bowls | 24 | 15 | 0 | 9 |
| Linen tea towels | 40 | 22 | 6 | 12 |
| Soy candles | 30 | 30 | 0 | 0 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Storing consigned goods with stock the business bought outright, so a stocktake cannot tell them apart.
- Leaving sales of consigned goods unreported to the consignor until the end of the period, so the two businesses' records drift apart.
- Taking goods on consignment with nothing in writing about payment, unsold goods or damaged items.
- Assuming consigned goods belong to whichever business holds them, instead of checking the agreement with your accountant.
Related terms
Related service
Small business bookkeeping
Your books kept current, every month.
Sources
- Commercial consignment
Australian Financial Security Authority (Personal Property Securities Register). Current at 16 October 2026, released 16 October 2026. Checked 16 October 2026.
© Commonwealth of Australia Licence: PPSR website copyright notice: Commonwealth copyright (unaltered reproduction for personal, non-commercial or in-house use only).