Example of Inventory Difference in Consignment Stock

The following graphic shows an example of a material valuated at standard price.

Since 20 pieces are missing in consignment storage, the "Payables from consignment stores" account is posted with the amount of 20 pieces x $11/piece = $220. Due to the variance between the consignment price and the price from the material master record, the offsetting entry is divided as follows: the value from the difference quantity x the price variance (20 pieces x $1.00) is posted to the "expenditure from consumption" account and the remaining amount is posted to the "expenditure from physical inventory" account.

For a material with a moving average price, postings are only made to the "Payables for consignment stores" and "Expense from physical inventory" accounts.