Final answer:
Revenue is recognized by the consignor when they receive an account sales from the consignee, indicating that the goods have been sold.
Step-by-step explanation:
Revenue is recognized by the consignor when the consignor receives an account sales from the consignee. This is in accordance with the revenue recognition principle, which dictates that revenue should be recorded when it is earned and realizable, rather than when cash is received. Consignment involves the consignor sending goods to the consignee, who holds the goods and attempts to sell them.
The consignor retains ownership of the goods until they are sold. Revenue is earned when the consignee reports a sale through an account sales report, not merely upon shipment or receipt of the goods, nor upon receiving an advance from the consignee. Revenue is recognized by the consignor when the consignee receives the goods. This is because the consignor has completed its obligation by delivering the goods to the consignee. Once the goods have been received, the consignor can recognize revenue.