LIFO vs. FIFO: What's the Difference?
Consignment involves giving goods to another party to sell, receiving payment only after sale. Sale is the immediate transfer of ownership for a price.
Consignment is a unique business arrangement where a person or company (consignor) provides goods to another party (consignee) to sell on their behalf. In this arrangement, the consignor retains ownership of the goods until they are sold. Sale, on the other hand, is a straightforward transaction where goods or services are exchanged for money or other considerations, and the ownership of the goods is immediately transferred to the buyer.
In a consignment, the risk remains primarily with the consignor as they are only paid when and if the goods are sold. In contrast, in a sale, once the transaction is complete, the seller has received payment, and the risk of the goods passes on to the buyer.
Consignment is typically used for specialty or high-value items where immediate sale might be challenging, such as art galleries or second-hand shops. Sale is a standard transaction used universally for goods and services, from grocery items to homes.
When goods are on consignment, they might be returned to the consignor if not sold within a specific timeframe. In a sale, goods usually can't be returned unless there's a specific agreement or policy allowing returns.
The primary motivation behind consignment is to reach a broader market or utilize the expertise of the consignee to sell a product. With a sale, the primary motivation is often immediate revenue generation.
Remains with consignor until sold
Transferred immediately to the buyer
After the goods are sold
At the time of the transaction
Remains with consignor
Transferred to the buyer
Possible if not sold within a timeframe
Based on the seller's return policy
Broader market reach or consignee's expertise
Immediate revenue generation
LIFO and FIFO Definitions
The artist placed her paintings on consignment at the local gallery.
Merchandise provided to be sold but owned by the supplier.
The act of transferring ownership in exchange for money.
The car's sale was finalized yesterday.
The boutique had a diverse range of dresses on consignment.
A shipment of goods to a consignee.
A special promotion with reduced prices.
The mall is having a huge end-of-season sale this weekend.
The consignment of electronics arrived at the store today.
Goods held for sale by one party for another.
The activity of selling goods or services.
The sale of luxury items increased this quarter.
Jane's jewelry business thrived on consignment deals with major retailers.
The total number of sold goods or the revenue generated from selling.
The bookstore reported a surge in sale after featuring a celebrity author.
The vintage watches on consignment attracted many collectors.
A business arrangement where payment is given after goods are sold.
The period during which a seller promotes goods at reduced prices.
I bought this shirt during the Black Friday sale.
See last-in, first-out.
See first-in, first-out.
Inventory accounting in which the most recently acquired items are assumed to be the first sold
An accounting method in which goods in inventory are valued at the price of the most recent acquisition of each type of goods, and those used up from inventory are valued at the cost of those first acquired.
Inventory accounting in which the oldest items (those first acquired) are assumed to be the first sold
What is consignment?
Consignment is an agreement where goods are given to another party to sell, retaining ownership until sold.
When is ownership transferred in a sale?
In a sale, ownership is transferred immediately upon transaction.
What motivates most sales?
The primary motivation behind sales is immediate revenue generation.
What defines a sale?
Sale is the act of transferring ownership of goods or services in exchange for money.
Can a sale occur online?
Yes, sales can occur in physical locations or online platforms.
What is a consignment shop?
A consignment shop sells goods on behalf of the owner, paying them once the item is sold.
Are consignments common in art galleries?
Yes, many artists place their works on consignment in art galleries.
Who retains the risk in a consignment?
In a consignment, the risk remains primarily with the consignor.
Are sales usually returnable?
Sales are returnable based on the seller's specific return policy.
Can consigned goods be returned?
Yes, consigned goods might be returned if not sold within a specified timeframe.
How is a sale price determined?
A sale price can be set by the seller based on various factors like cost, competition, and demand.
Why would someone opt for consignment?
Consignment offers a broader market reach or leverages the consignee's selling expertise.
Are there fees associated with consignments?
Often, consignees charge a fee or commission for selling consigned goods.
Do consignments have contracts?
Often, consignments come with contracts detailing terms, fees, and other conditions.
Can sales be reserved or pre-ordered?
Yes, some sellers offer reservation or pre-order options for upcoming sales.
What is a point of sale (POS)?
A point of sale (POS) is the place where a retail transaction is completed.
What's a clearance sale?
A clearance sale is a discount sale to clear out old or excess stock.
Can consigned goods be from multiple consignors in one store?
Yes, a store can have consigned goods from multiple consignors simultaneously.
How are sales usually promoted?
Sales are often promoted using advertising, discounts, or special offers.
How is payment settled in consignment?
Payment in consignment is settled after the goods have been sold.
Written bySawaira Riaz
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Edited byHuma Saeed
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