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Consignment Account Notes
Consignment Account Notes
Nature of Consignment
A trader sends goods to an agent to sell for him. These goods are sent on consignment.
The ownership of goods still belongs to the trader, therefore all profits on consignment
belongs to the trader. The agent earns commissions, he is NOT the owner, he is only the
employee.
Consignment Terms
Consignor:
The trader who sends goods to the agent to sell for him.
Consignee:
The agent who receives the goods.
Account Sales: The statement prepared by the agent (consignee) to tell the trader
(consignor), how much goods he sold. (source document to trader)
Commissions: Salary earned by the agent (consignee) if he can sell goods.
Commissions are calculated on gross proceeds of sales.
Del Credere
Commission: Additional commissions earned by the agent (consignee) if the agent if
the bears the responsibility of bad debts occurred. (Note: If there is bad
debt, a del credere commission cannot be received by the consignee).
Proforma
Invoice
:
A detailed invoice that informs the consignee on the description of
the
goods and the minimum selling price for the goods. This invoice does
not charge the consignee.
CONSIGNORS RECORDS
The primary object for preparing the consignment account is to find the profit/loss on
each consignment separately. For that the consignor prepares four (4) basic records:
1.
2.
3.
4.
2: Consignment outwards is a combined trading and profit and loss account relating
solely to consignment.
Date
2a) Stock on hand It is not necessary that all consignment should be completed during
the current year. If all consignment is not sold a value should assigned to it. This
calculation does NOT include selling expenses or commissions.
Original cost + consignors expenses + consignees expenses (except selling exp. &
commissions) = Total value/Total cost.
Value of unsold stock = unsold quantity x total value
total quantity
2b) Calculation of expenses If all of the stock is not sold it is also necessary to
allocate/spread out the cost of expense for the goods sold.
Expense for profit & loss = consignors expenses + consignees expenses (except selling
exp. & commissions) = Total expense
Expense for profit & loss = amount sold x total expense
amount consigned
3) Individual account of Consignees These are opened for each agent and are debited
with sales made, and credited with the consignees expenses and commissions.
Date
Sales
(no unsold stock)
Consignee Account
Date all expense of the consignee only
(no expenses of the consignor)
4) Profit and Loss on Consignment This account is also a comprehensive account and
contains profits made on all consignments carried out during the trading period. The total
of this is transferred to the profit and loss account at the end of the year.
Profit and loss on consignment
Date Consignment - R.Rolly
(this amount is transferred from the
consignment outwards account)
CONSIGNEES RECORDS
The consignees records are less involved and because he does not have to keep record of
stock except by way of memorandum. The consignee records include:
1.
2.
3.
4.
5.
1. Account Sales to show the consignor amount of sales, all expenses paid for on
consignment, and commission deducted. This will show how much money the
consignee is remitting/sending to the consignor.
Account Sales
Consignee Name
Nassau
Consignment of goods sold on behalf LAD Limited, Andros
Sales: 300 cases @ $15 each
Payments:
Landing charges
Selling expenses
Commission at 5% on $4500
Del Credere Commission at 2% on $4500
Remittance/Bank draft/Cheque
$
4500
580
120
225
90
700
3800
315
3485
Date
3. Debtors Account to record the consigned goods that was sold on credit.
Date
Debtors Account
Date Cash received
Balance c/d
Goods
Debtor
1. Kelly Jones, San Salvador, consigned goods originally costing $6 000 to Shelly Holmes
in Nassau. Shelly paid and additional $250 for trucking, $180 insurance and $120
landing charges. There were 160 items in total. (BGCSE 2002)
What is the total value of the goods consigned?
A.
B.
C.
D.
$6 000
$6 370
$6 430
$6 550
1b. If 40 items remain unsold, what would be the value of Kellys stock on hand?
(BGCSE 2002)
A.
B.
C.
D.
$1 500.50
$1 592.50
$1 607.50
$1 637.50
2. A Consignee does not have to keep a stock record for goods consigned, except for
memorandum purposes. Why is it not necessary for him to keep a record of stock?
(BGCSE 2003)
A.
B.
C.
D.
Commission
Consignment commission
Del credere commission
Proforma commission
The Consignor is the person who owns the goods and sends them to the agent
The Consignor is the person who receives and sells the goods
The Consignor is the person who receives the a del credere commission
The Consignor is the agent who sells the goods
$5 245
$5 620
$7 125
$7 500
7. P. Lowe ships goods $1 200, from New Providence on consignment to B. Dean in Long
Island. Which entry should be made in the books of P. Lowe? (BGCSE May 2006)
A.
B.
C.
D.
DEBIT
Goods Consigned Outwards
Consignment to B. Dean, Long Island
Goods Consigned Inwards
Consignment to B. Dean, Long Island
CREDIT
Consignment to B. Dean, Long Island
Goods Consigned Outwards
Consignment to B. Dean, Long Island
Goods Consigned Inwards
10
11
BGCSE 2002)
C.
Prepare the accounts necessary to record these details in the books of the
consignor.
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