Professional Documents
Culture Documents
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1. Ownership of the goods rests with the consignor till The ownership of the goods transfers with the transfer
the time they are sold by the consignee, no matter the of goods from the seller to the buyer.
goods are transferred to the consignee.
2. The consignee can return the unsold goods to the Goods sold are the property of the buyer and can be
consignor. returned only if the seller agrees.
3. Consignor bears the loss of goods held with the It is the buyer who will bear the loss if any, after the
consignee. delivery of goods.
4. The relationship between the consignor and the The relationship between the seller and the buyer is
consignee is that of a principal and agent. that of a creditor and a debtor.
5. Expenses done by the consignee to receive the goods Expenses incurred by the buyer are to be borne by the
and to keep it safely is borne by the consignor. buyer itself after the delivery of goods.
Accounting for Consignment Business
• The consignor and consignee keep their own books of
accounts.
• The consignor may send goods to many consignees.
• Also, a consignee may act as agent for many consignors.
• It is appropriate that both of them would want to know profit
or loss made on each consignment.
Books of the Consignor
• The transactions relating to each consignment are recorded
in such a way that the profit or loss of each consignment can
be ascertained separately.
• It requires the preparation of a special account known as
consignment account.
• A consignment account is a nominal account prepared to
find out the profit or loss of a consignment.
• Consignment A/C
Goods sent on Consignment A/c …… 100,000 Mama Traders A/c ………… 126,000
Expenses on consignment …………... 500 (Sale proceeds)
Mama Traders A/c:
Carriage ………………….…… 1,500
Sales expenses …………….…. 2,000 3,500
Mama Traders: Commission ……….. 12,600
P & L A/c (Transfer) ………….…,.… 9,400
126,000 126,000
Mama Traders Account
Dr. Cr.
Consignment to Mama A/c ………… 126,000 Bill Receivable A/c ………… 50,000
Consignment to Mama A/c … 3,500
Consignment to Mama A/c … 12,600
Cash ………..………………. 59,900
126,000 126,000
Goods sent on Consignment Account
Dr. Cr.
126,000 126,000
Bills payable A/c
Dr. Cr.
Particulars Amount
Sale Proceeds:
40 TV Sets sold at $2,500 each ………… $100,000
10 TV Sets sold at $2,600 each ………… 26,000 $126,000
Less: Expense:
Carriage …………………………... $1,500
Sales expenses ……………………. 2,000
Commission @ 10% ……………... 12,600 (16,100)
115,800 115,800
Mama Traders Account
Dr. Cr.
Consignment to Mama A/c ………… 75,000 Bill Receivable A/c ………… 50,000
Consignment to Mama A/c … 3,500
Consignment to Mama A/c … 7,500
Cash ………..………………. 14,000
75,000 75,000
• Goods sent on Consignment Account
Dr. Cr.
75,000 75,000
Bills payable A/c
Dr. Cr.
Particulars Amount
Sale Proceeds:
30 TV Sets sold at $2,500 each ……………………… $75,000
Less: Expense:
Carriage ………………………..……... $1,500
Sales expenses …………………...……. 2,000
Commission @ 10% …………………... 7,500 11,000
Net proceeds …………………………………………. 64,000
Less: Advance (Bill) …………………………………. 50,000
Balance sent by Draft ………………………………… 14,000
The End!
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