Consignment inventory
In one sentenceGoods a supplier places with a business to sell on its behalf, which remain the supplier's property until sold, so they are not part of the inventory of the business holding them.
Simply put
If the goods are with you on consignment, do not record them in your inventory or your purchases, because their ownership and risks still belong to the supplier.
When they are sold, you earn your commission or margin and pay the rest to the supplier. Keep a separate record for them so they do not get mixed up at the count.
Worked example
A perfume showroom received consignment goods worth 50,000 SAR from a supplier, sold 30,000 SAR of them, and its agreed commission is 10% of sales.
Goods received on consignment50,000 SAR (not in your inventory)
Your commission30,000 × 10% = 3,000 SAR
Due to the supplier30,000 − 3,000 = 27,000 SAR
Your revenue from these sales3,000 SAR commission
Don't confuse it with
Inventory held by third partiesConsignment goods are with you but are not yours, while inventory held by third parties is yours but is with someone else.