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As the goods sent on consignment by the consigner are not his sales, he must not record consignment as sales

and the consignee must must not record them as purchases. The consigner should not take up any profit on the transaction until the goods have been actually sold by the consignee. Since the goods still belong to the consignor, any unsold goods in the hands of the consignee at the end of the trading period should be included in the consignor's stock. The recording of the consignment transactions in the books of the consignor and consignee will be made in the following manner:

Accounting Entries in the Books of Consignor:

(1) On dispatch of goods:Consignment account To Goods sent on consignment account (2) On payment of expenses on dispatch:Consignment account To Bank account (3) On receiving advance: Cash or bills receivable account To Consignee's personal account (4) On the consignee reporting sale (as per A/S):Consignee's personal account To Consignment account (5) For expenses incurred by the consignee (as per A/S):Consignment account To Consignee's personal account (6) For commission payable to the consignee:Consignment account To Consignee's personal account
(With the cost of goods)

(With the amount spent as expenses)

(With the amount cash or bill)

(With gross proceeds of sales)

(With the amount of expenses)

(With the amount of expenses)

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: Profit and loss account To Consignment account

Note: The goods sent on consignment account may be closed by a transfer to trading account. When Consignment is Partly Sold: 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 The consignor's account will be closed by debiting it with cash or final bill or draft in settlement.