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:
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.
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.
| 1. |
When goods are
sent to consignee: |
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Consignment A/C |
Dr. |
| |
Goods sent on consignment A/C |
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(Being goods sent to
agent for sale) |
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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' |
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| 2. |
For adjustment of
the difference between invoice price
and cost price: |
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| |
Goods sent on
consignment A/C |
Dr. |
| |
Consignment A/C |
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| |
(Being excess of
invoice price over cost price of
goods sent adjusted) |
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| 3. |
For expenses paid
by consignor: |
. |
| |
Consignment A/C |
Dr |
| |
Cash/Bank A/C |
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(Being expenses
paid) |
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| 4. |
On receiving
advance from consignee: |
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Cash/Bank |
Dr. |
| |
Consignee A/C |
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(Being advance
received from agent) |
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| 5. |
If consignee has
accepted a bill of exchange as an
advance: |
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Bills receivable A/C |
Dr. |
| |
Consignee A/C |
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(Being acceptance
received from agent) |
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| 6. |
When goods are
sold by consignee: |
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Consignee A/C |
Dr. |
| |
Consignment A/C |
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(Being goods sold by
agent) |
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| 7. |
For goods taken
over by consignee for his personal
use: |
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Consignee A/C |
Dr. |
| |
Consignment A/C |
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(Being goods taken
over by agent) |
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| 8. |
For expenses paid
by agent: |
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Consignment A/C |
Dr. |
| |
Consignee A/C |
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(Being expenses
incurred by agent) |
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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. |
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| 9. |
For unsold goods
with the consignee: |
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Consignment stock
A/C |
Dr. |
| |
Consignment A/C |
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(Being value of
closing stock with agent) |
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Note:
If invoice value of stock is more
than cost, the excess of invoice
price over cost will be adjusted. |
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| 10. |
For adjustment of
closing stock: |
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Consignment A/C |
Dr |
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Consignment stock reserve A/C |
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(Being profit
included in stock adjusted) |
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| 11. |
For abnormal loss
of goods: |
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| a. |
1st Method: |
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(i) Loss of stock
A/C |
Dr |
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Consignment A/C |
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(Being total value
of loss of stock) |
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(ii) Bank/Insurance
Co. A/C |
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Loss of stock A/C |
Dr |
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(Being insurance
claim for sale) |
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(iii) Consignee A/C |
Dr |
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Loss of stock |
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(Being damaged goods
sold by agent) |
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(iv) Profit and loss
A/C |
Dr |
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Loss of stock A/C |
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(Being net loss of
stock transferred to profit and loss
account) |
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| b. |
2nd Method: |
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(i) Bank/Insurance
Co. A/C |
Dr |
| |
Consignment A/C |
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(Being amount of
insurance claim) |
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(ii) Consignee A/C |
Dr |
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Consignment A/C |
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(Being damaged goods
sold by agent) |
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(iii) Profit and
loss A/C |
Dr |
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Consignment A/C |
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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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