Consignment stocking refers to a practice in which an organization or an individual entrepreneur sells stock through consignment. As explained by Software as a Service Utility (SAASU), although the trader gives the buyer the item being purchased, he or she retains the ownership of the item transferred until the item is sold to the end user. The goods could be in a consignment shop or in transit to their destination.
There are several methods by which a supplier undertaking consignment stocking may track his or her consignment stock, which is already at the client's selling point. The most common of these methods is the use of an inventory transfer to move the goods on sale from a stock account category to a stock consignment category. A key feature of consignment stocking is that while the seller still legally owns the stock, it is in the process of moving and changing location. The seller owns the items until they are sold. Hence, such goods remain in an asset account until they are sold. Since the goods being moved are legally owned by a party other than the one holding them, all the risks associated with the goods are borne by the first party; the holding party simply keeps and sells them. Because ownership only changes when consignment goods are issued or sold, any unused or unsold goods are returned to the supplier.