Consigned goods are recognized as revenue by which party?

Consigned goods are a specific arrangement where a consignor provides goods to a consignee to sell on their behalf, but the consignor maintains ownership of the goods until they are sold. The recognition of revenue occurs at the point when the consignee successfully sells the goods to a third party.

The correct choice emphasizes that revenue is recognized by the consignor once they receive notification and payment from the consignee for the goods that were sold. This reflects the principle of revenue recognition, which states that revenue should be recognized when it is realizable and earned, meaning the seller (the consignor in this case) must have completed their part of the transaction, which includes getting paid for the merchandise.

This process is crucial as it ensures accurate financial reporting and aligns with the accounting standards that advocate for the revenue to be recognized only after it has been earned through actual sales transactions. Thus, it captures the essence of revenue recognition in a consignment arrangement.