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Home Accounting for Consignment Sales Journal Entries in the Books of Consignor

Journal Entries in the Books of Consignor:

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Learning objectives of this article:
  • What is are consignment and consignee's accounts?
  • What journal entries are made in the books of consignor?
  • How consignment and consignee's account are prepared in the books of consignor?

Consignment and Consignee's Account:

The goods sent by the consignor to consignee is sold on behalf of the consignor. therefore, the consignor would like to know the profit earned or loss suffered from each different consignment. Before we discuss the entries in the books of the consignor, it is helpful to understand the nature of the following two accounts:

  1. Consignment account
  2. Consignee account

Consignment Account:

Consignment account is by nature a profit and loss account. One separate account is devoted to each different consignment with the heading "Consignment to.........account". Actually the consignment account is a particular trading and profit and loss account. All expenses specially related to the consignment must be debited to the concerned consignment account whether incurred by the consignor or by the consignee and all revenues and closing stock should be credited to this account. The difference between the two sides of this account will show the result of the particular consignment.

Consignee Account:

This is a personal account. It should be noted that the consignee is not the buyer. His personal account, therefore, is not debited when goods are sent to him. In cases where it is customary for the consignee to send some money as an advance against the consignment the payment is merely and advance (by way of security) and not a part of payment. Hence the advance received from the consignee should be posted to the credit side of the consignee's personal account. In case part of the stock is still lying unsold the proportionate amount of advance should be carried down as credit balance in consignee's personal account. In case where consignor draws a bill on consignee the bill is known as a documentary bill.

Journal Entries in the Books of Consignor:

1. When goods are sent to consignee:  
  Consignment A/C Dr.
       Goods sent on consignment A/C  
  (Being goods sent to agent for sale)  
  Note: In case a consignor has more than one agent (consignee), separate consignment account is prepared for each agent. Each consignment account is identified with the name of place, for example 'consignment to Chicago' or 'Consignment to New York'  
2. For adjustment of the difference between invoice price and cost price:  
  Goods sent on consignment A/C Dr.
       Consignment A/C  
  (Being excess of invoice price over cost price of goods sent adjusted)  
3. For expenses paid by consignor: .
  Consignment A/C Dr
       Cash/Bank A/C  
  (Being expenses paid)  
4. On receiving advance from consignee:  
  Cash/Bank Dr.
       Consignee A/C  
  (Being advance received from agent)  
5. If consignee has accepted a bill of exchange as an advance:  
  Bills receivable A/C Dr.
       Consignee A/C  
  (Being acceptance received from agent)  
6. When goods are sold by consignee:  
  Consignee A/C Dr.
       Consignment A/C  
  (Being goods sold by agent)  
7. For goods taken over by consignee for his personal use:  
  Consignee A/C Dr.
       Consignment A/C  
  (Being goods taken over by agent)  
8. For expenses paid by agent:  
  Consignment A/C Dr.
       Consignee A/C  
  (Being expenses incurred by agent)  
  Note: If any expense is born by the agent personally, such expenses will not be debited to consignment A/C. Consignor will not make any entry for such expenses. These expenses will be debited to profit and loss account in the books of consignee.  
9. For unsold goods with the consignee:  
  Consignment stock A/C Dr.
       Consignment A/C  
  (Being value of closing stock with agent)  
  Note: If invoice value of stock is more than cost, the excess of invoice price over cost will be adjusted.  
10. For adjustment of closing stock:  
  Consignment A/C Dr
       Consignment stock reserve A/C  
  (Being profit included in stock adjusted)  
11. For abnormal loss of goods:  
a. 1st Method:  
  (i) Loss of stock A/C Dr
         Consignment A/C  
  (Being total value of loss of stock)  
  (ii) Bank/Insurance Co. A/C  
         Loss of stock A/C   Dr
  (Being insurance claim for sale)  
  (iii) Consignee A/C Dr
         Loss of stock  
  (Being damaged goods sold by agent)  
  (iv) Profit and loss A/C Dr
         Loss of stock A/C  
  (Being net loss of stock transferred to profit and loss account)  
b. 2nd Method:  
  (i) Bank/Insurance Co. A/C Dr
         Consignment A/C  
  (Being amount of insurance claim)  
  (ii) Consignee A/C Dr
         Consignment A/C  
  (Being damaged goods sold by agent)  
  (iii) Profit and loss A/C Dr
         Consignment A/C  
  Note: If damaged goods have not been sold, net realizable value of such goods will be included in closing consignment stock.  
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Account Sales
Difference between consignment and sales
Journal entries in the books of consignor
Valuation of closing/unsold stock in consignment business
Invoicing goods at a price higher than cost price




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