Before You Start

This guide assumes familiarity with basic accounting principles and requires QuickBooks Online Plus/Advanced or Desktop Premier/Enterprise for proper inventory tracking.

Overview

35 min
Setup Time
Advanced
Difficulty
As Needed
Maintenance

What You’ll Learn

  • How to differentiate owned vs. consigned inventory
  • Setting up QuickBooks for consignment items
  • Recognizing revenue and COGS only upon sale
  • Reconciling vendor statements for payouts

1. Preparation Steps

Effective consignment accounting starts with proper setup in QuickBooks.

Required Accounts

  • Consignment Inventory (Other Current Asset - For tracking, not ownership)
  • Consignment Sales (Income)
  • Consignment COGS (Cost of Goods Sold)
  • Consignment Payable (Other Current Liability)

Optional (but recommended)

  • Consignment Fees Expense (Expense)
  • Consignment Vendor Payouts (Bank/Asset for clearing)
  • Consignment Item Tag (Custom Field)

2. Consignment Models & QuickBooks Approach

Understanding how you manage consigned goods dictates your QuickBooks setup.

This method leverages QuickBooks’ inventory features to track consigned goods.

Pros:
  • Accurate item-level tracking.
  • Automated COGS upon sale.
  • Better for high-volume consignment.
Cons:
  • Requires QuickBooks Plus/Advanced.
  • More complex initial setup.
  • Careful handling to avoid asset overstatement.

Method B: Track as Non-Inventory / Service

This is a simpler approach for businesses with limited consignment items.

Expert Tip: We strongly recommend using Method A (tracking as inventory) in QuickBooks Online Plus/Advanced or Desktop Premier/Enterprise. This provides a clear audit trail for items and helps ensure accurate financial statements by differentiating owned vs. consigned stock.

3. Step-by-Step: QuickBooks Setup for Consignment

Here’s the workflow for setting up your accounts and items in QuickBooks for Method A.

Here is a sample code block to show how an inventory item might be defined for tracking.

{
  "item_name": "Consigned Artwork - SKU123",
  "description": "Unique piece by Artist X, on consignment",
  "type": "Inventory",
  "purchase_cost": 0.00,
  "sales_price": 500.00,
  "preferred_vendor": "Artist X Consignments",
  "custom_field_consignment": "Yes"
}

4. Recording Transactions

  1. 1

    Receive Consigned Goods

    Use a non-posting transaction (e.g., Inventory Adjustment with zero value for QBO or a Purchase Order in Desktop) to track items physically received but not yet owned. Leverage custom fields to mark them as “consigned”.

  2. 2

    Sell a Consigned Item

    When an item sells, create a Sales Receipt or Invoice. The full sales price hits ‘Consignment Sales’ (or a dedicated Consignment Income account). Simultaneously, create a journal entry or use specific item mapping to record the vendor’s portion as a liability (‘Consignment Payable’).

  3. 3

    Pay Consignment Vendor

    When you make a payout, create a Bill or Expense from the vendor, coding it to ‘Consignment Payable’. This reduces your liability and the cash account. Reconcile this against the vendor’s statement.

Critical Note: Inventory Asset

Consigned inventory should not be recorded as an asset on your balance sheet until sold (if you take ownership at sale) or if it’s your own inventory. Misclassifying it overstates your business’s assets and distorts financial health.

5. Reconciliation and Reporting

Reconciliation Checklist

  • Review consignment inventory levels regularly
  • Match Consignment Payable to vendor statements
  • Verify Consignment Sales against POS reports
  • Generate profit & loss reports excluding consigned COGS until sold

Need Help?

Get Support

Navigating complex inventory accounting can be tricky. Our team specializes in QuickBooks setups for unique business models like consignment.

Contact Us