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Consignment Accounting Journal Entries: Accounting Entries in the Books of Consignor: (1) On dispatch of goods:Consignment account (With the

cost of goods) To Goods sent on consignment account (2) On payment of expenses on dispatch:Consignment account (With the amount spent as expenses) To Bank account (3) On receiving advance: Cash or bills receivable account (With the amount cash or bill) To Consignee's personal account (4) A/S):On the consignee reporting sale (as per (With

(With the amount of expenses) To Consignee's personal account (6) For commission payable to the consignee:Consignment account (With the amount of expenses) To Consignee's personal account Assuming that all the goods sent have been sold, the consignment account will show at this stage the actual profit or loss made on it. The same is transferred to profit and loss account. The entry in case of profit is:

Consignment account To profit and loss account In case of loss the entry is:

Consignee's personal account gross proceeds of sales) To Consignment account

(5) For expenses incurred by the consignee (as per A/S):Consignment account When Consignment is Partly Sold:

Profit and loss account To Consignment account Note: The goods sent on consignment account may be closed by a transfer to trading account.

When all the goods sent on consignment have not been sold., the value of unsold goods in the hands of the consignee must be ascertained and the profit or loss should be found out by taking this stock into account. The entry is: Stock on consignment account To Consignment account Stock on consignment account is an asset and will be shown in the balance sheet of the consignor. Valuation of stock is discussed on valuation of stock page.

Accounting Entries in the Books of Consignee:


(1) When consignment goods are received:No entry is made in the books of account. The consignee is not the owner of the goods and therefore he makes no entry when he receives the goods. (2) For expenses incurred by the consignee:Consignor's personal account To Cash account (3) When advance is given:Consignor's personal account To Cash or bills payable account (4) When goods are sold:Cash or bank account To Consignor's personal account (5) For commission due:Consignor's personal account To commission account

Valuation of Unsold Stock Or Closing Stock in Consignment Accounting: How is the closing stock or unsold stock laying with the consignee valued?. The valuation of stock laying with the consignee at the time of final closing of the account of the consignor is generally made at cost or market price whichever is less. The meaning of cost, however, should be properly understood. Cost should not mean merely the cost at which the consignor invoices the goods. If such expenses as normally increase the value of goods have been incurred, a proportionate of such expenses should be included in the cost. In other words, all the expenses incurred to move the goods from the consignor's premises to the premises of consignee should be included. Expenses which are incurred up to the moment the goods are received into the godown of the consignee are treated as part of the cost. But expenses incurred after the goods have been put into the godown should not be included into the cost because such expenses do not increase the value of goods. Examples of such expenses are godown rent, insurance godown, advertisement, salaries of salesmen, etc. It does not matter who pays the expenses (consignor or consignee). Example: Suppose, 1000 units are dispatched at a cost of $20 each. The consignor pay $100 for insurance in transit and $200 for packing. The consignee pays 700 for freight, $100 as octroi duty and $100 as cartage. He also pays $200 as godown rent and $150 as insurance premium. The last two items will be excluded while calculating the cost. The total cost will be $20,000 + $100 + 200 + 700 + $100 + $100 = $21,200. The cost per unit, therefore, comes to $21.20. If 100 units remain unsold, the value of stock will be: 100 21.20, i.e., $2,300. If the market price is less than this figure, then the value of stock will be on the basis of market price.