Consignment Inventory: Keep Owned and Held-for-Others Stock Separate

Consignment inventory, also called consignment stock, is stock that one business (the consignor) owns and another business (the consignee) holds to sell or use. The consignor keeps ownership until the goods are sold or used. Ownership and location are therefore two separate facts, and your records need a place for each.

Consignor and consignee: who is who

The consignor sends the goods and owns them. The consignee holds them and sells or uses them. Examples: a distributor placing packaged goods in a retailer's store, or a manufacturer leaving spare parts at a customer's plant.

In this guide, "stock others hold for you" means you are the consignor. "Stock you hold for others" means you are the consignee.

How consignment inventory works

1. Agree the terms. Set the price, the commission, how long the goods stay and what happens to unsold goods.
2. Send the goods. They leave the consignor's warehouse as a transfer, not a sale.
3. Sell or use them. The consignee stores the goods and reports what it sold, used and returned each period.
4. Settle. The consignee pays the consignor for what sold, less any agreed commission.
5. Close the period. Unsold goods go back to the consignor, or stay on for another period.

Each step changes one of two facts, who owns the stock or where it sits, and your records need to follow both.

Consignment vs wholesale vs VMI

Consignment decides who owns the stock. Vendor managed inventory (VMI) decides who chooses the reorder quantity, so one arrangement can be both.

Benefits and risks of consignment stock

Both risks are record risks. They shrink when every unit has a named owner and a known location.

The consignor owns consignment stock until the consignee sells it to a customer or uses it. So the consignor keeps it in its inventory, and the consignee keeps a record of quantities only.

If you follow Ind AS (Indian Accounting Standards), as of November 2026 the consignor generally books revenue when the consignee sells to its own customer, or when an agreed period in the contract expires, because until then the consignee has not taken control and has no unconditional duty to pay (ICAI, Ind AS 115 study material, section 6.5).

If you hold stock for others

Do not book it as a purchase or as your inventory. Keep a quantity record by consignor, in a location used only for that consignor's goods. You owe the consignor for what sells, less any commission you have agreed, and the consignor will want regular statements.

Microsoft Dynamics 365 Supply Chain Management records receipt of vendor-owned consignment stock as quantities only, with no general ledger entries (Microsoft Learn, updated April 2026).

If others hold your stock

The stock stays in your inventory at cost, in a location named for the consignee. For your stock records and revenue, do not treat dispatch as a sale, and record a sale when the consignee reports one. Tax invoicing timing can differ (see "What this guide leaves out"). Chase late statements: every unreported sale is stock that still looks yours but has gone.

Record seven things for every consignment movement: owner, location, quantity, date, lot or serial number where relevant, the consignee's sales or usage report, and returns. If one is missing, you cannot prove whose unit it is or where it sits.

The consignment stock record checklist

How consignment stock accounting works (check with your CA)

Generally, the consignor keeps the stock as inventory at cost and records the sale when the consignee reports it. The consignee records no purchase and no inventory. It records what it owes the consignor, and its commission, when the goods sell. Entries depend on your agreement and accounting framework, so confirm them with your chartered accountant (CA) before posting.

Owned and held-for-others stock gets mixed up because the physical move, the sale and the paperwork happen on different days, and nobody owns the gap. The usual patterns:

• The shipment is posted as a sale, so stock disappears and revenue is raised before anyone has bought.
• The shipment is never posted, so the system shows stock on a shelf it left days ago.
• The consignee's sales statement arrives monthly, so system and store drift apart for weeks.
• Units of one stock-keeping unit (SKU) that you own and units you hold for others sit in the same bin, so a count cannot tell them apart.
• Returns and damaged goods move physically with no record.

Each pattern shows up as a stock difference. Our guide to inventory discrepancy causes shows how to trace system versus shelf differences back to the first unrecorded movement.

Keep them apart by giving each owner or holder its own location, moving stock between locations by transfer, and viewing all locations together. The location then carries the ownership fact, so a count of any location tells you whose stock it is.

Give each owner or consignee its own location

Use one location per consignee for stock others hold for you, for example "Retailer A, ours, held by them". Use one per consignor for stock you hold for others, for example "Supplier B, theirs, held by us". Keep your own warehouse for stock you own and hold. If you own some units of a SKU and hold other units of it for others, keep those units in different locations, even under one SKU code.

Move stock by transfer, not sale

A dispatch is a transfer from your warehouse to the consignee's location. A reported sale takes stock out of that location and raises the invoice. A return is a transfer back. TallyPrime follows this logic: you can flag a godown (its word for a storage location) as "our stock with third party", and stock sent to an agent stays in your inventory (TallyPrime help).

See stock across locations in one view

Put every location on one view, with a column for location. Your owned total is your warehouse plus the locations for stock others hold for you. Stock you hold for others stays outside that total. Our stock across locations view shows live balances by warehouse.

Owned warehouse  --- transfer out --->  Consignee location (Retailer A)
 (we own, we hold) <-- transfer back --  (we own, they hold)

Supplier's goods --- receipt --------->  Held-for-others location (Supplier B)
                                         (they own, we hold)

Owned stock = Owned warehouse + Consignee locations
Not ours    = Held-for-others locations

Alt text: a diagram of three locations. Stock moves between the owned warehouse and a consignee location by transfer, and both count as owned. A separate held-for-others location receives a supplier's goods and sits outside the owned total.

A distributor starts with 500 units in its own warehouse. It ships 200 to a retailer on consignment, which lowers its own warehouse to 300 and records no sale. Later the retailer reports 60 sold. The distributor then owns 440 units worth ₹1,98,000 at cost: 300 in its warehouse and 140 at the retailer.

This example is illustrative. Assumptions: cost ₹450 a unit, agreed price ₹600 a unit, Goods and Services Tax (GST) ignored.

Cost of the 60 units sold is 60 × ₹450 = ₹27,000, and ₹2,25,000 − ₹27,000 = ₹1,98,000.

Three-way check. Your records show 140 units at the retailer. The retailer's statement shows received 200, sold 60, closing 140. A physical count at the store finds 140. All three equal: pass. If the count finds 138, two units are missing or sold without a report. Resolve that before posting.

Run a three-way check every month: your records, the other party's statement and a physical count must agree for each location, SKU by SKU. Investigate every difference before the month closes.

Your auditor will ask for this evidence. Under Standard on Auditing (SA) 501 of the Institute of Chartered Accountants of India (ICAI), when stock in a third party's custody is material, as of November 2026 the auditor seeks that party's confirmation of quantities and condition. The auditor may also inspect documents such as warehouse receipts (ICAI, SA 501).

What the agreement should say about records

Have your lawyer cover three points:

• Count rights: you may count stock at the other party's premises on reasonable notice.
• Loss: who bears loss, theft or damage while the goods are with the consignee.
• Reporting dates: the day each month the statement is due, and its format.

Software helps when it can hold a separate location for each consignor or consignee, record a transfer that is not a sale, report stock by location, and keep stock you do not own out of your valuation. Test any system with these four checks:

How Arka Inventory handles separate locations

We build Arka Inventory natively on Salesforce. It supports multiple warehouses, transfers between them and visibility across warehouses, so you can keep a separate warehouse location for each consignor or consignee and see each balance side by side. Book a Demo to see how this works for your stock.

Multiple warehouses and purchase orders and transfers are on our Basic plan. Lot and serial tracking, BIN tracking (bin-level locations inside a warehouse) and Sales Orders are on our Enterprise plan; see our plans. For day-to-day handling, see warehouse management and lot and serial tracking.

Consignment stock stays the consignor's until it is sold or used, so every unit needs two facts on record: who owns it and where it is. Give each consignor and consignee its own location. Move stock by transfer, raise a sale only on a report, and run the three-way check every month.

If you want to see how separate warehouse locations, transfers and visibility across warehouses work for your stock, Book a Demo.