Consigned Inventory

I met with several CPA’s yesterday; discussing revenue recognition. Accounting for consigned inventory seems to be a pervasive nuisance. This is generally how I have handled it using Great Plains:

1.) Set up a unique inventory site for each distributor.
2.) Enter an Inventory Transfer Transaction to show the movement of items to a distributor.
3.) Enter a Sales Transaction when a sale is made to the end-user customer.

This process automatically creates the correct accounting entries to record the value and location of the inventory prior to sales to end-users, and properly records the sales in the correct accounting period.

This process has two weaknesses:

1.) The Inventory Transfer Transaction has limited out-of-the-box shipping documents. The In-Transit Transfer transaction in GP 10.0 improves on this a bit.
2.) Existing sales and inventory reporting to capture the inventory movements to the distributor may not be adequate, but I can certainly imagine that adequate reporting is available using SQL Server Reporting Services or some other reporting tool.

This process is easy to implement in Great Plains and can be embellished with additional reporting as required.

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