Consignment

Consignment

Meaning of consignment 

To consign means to send. In accounting terms consignment it means dealing with the situation where one person – owner of the goods (Consignor) send goods to another person – Agent (Consignee) to be sold on his behalf for a commission.

It is to be noted that only the physical possession of the goods transfers from the consignor to the consignee, the ownership of goods remain with the consignor.

Accounting for consignment in the books of Consignor

1.       Goods are consigned

Consignment A/c      Dr.

         To goods sent on consignment A/c

2.       For expenses incurred by consignor

Consignment A/c      Dr.

          To Cash A/c

3.       Advances received from consignee

Cash/Bank/Bills receivable    A/c

           To consignee A/c

4.       For sales made by consignee

Consignee    A/c      Dr.

          To Consignment A/c

5.       For expenses incurred by Consignee

Consignment A/c      Dr.

        To Consignee A/c

6.       For commission payable to Consignee

Consignment A/c      Dr.

        To Consignee A/c

7.       For Bad Debts

a)       When del-credere commission is not paid

Consignment A/c     Dr.

       To Consignee A/c

b)      When del-credere commission is paid

No entry is recorded as bad debts is to be borne by Consignee

8.       For cash/cheque/ bank draft received from Consignee as settlement

Cash/ Bank A/c           Dr.

       To Consignee A/c

9.       For Unsold Stock or Consignment Stock

Consignment Stock A/c      Dr.

        To Consignment A/c

10.   For Profit on Consignment

Consignment A/c    Dr.

        To P & L A/c

Valuation of Inventory / Consignment Stock

Cost of Unsold Goods (Units X Rate)                   XXX

Add: Proportionate Expenses of Consignor               XXX                   

       Total C’or Expense X Units of unsold stock

                                                Total Units           

               Stock in Transit                       XXX

Add: Proportionate Non-Recurring Exp of C’ee                  

        Total Non-recurring X Units of unsold stock

         C’ee Expense               Total Units Received    XXX

Value of Inventory / Consignment Stock                   XXX

Valuation of Abnormal Loss

Cost of Abnormal Loss (Units X Rate)                    XXX

Add: Proportionate Expenses of Consignor                 XXX                   

       Total C’or Expense X Units of Abnormal Loss

                                                Total Units           

                                                              XXX

Add: Proportionate Non-Recurring Exp of C’ee                  

        Total Non-recurring X Units of Abnormal Loss

         C’ee Expense               Total Units Received      XXX

Value of Abnormal Loss                                         XXX