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A shipment of goods by a manufacturer or wholesale dealer to an agent to be sold by him on commission basis, on the risk and account of the

former , is known as consignment..


The person who sends the goods to the agent to be sold by him on commission basis is called consignor. The person to whom the goods are sent for sale on commission basis is called the consignee.

Acounting treatment in the books of consignor


. When goods are sent to the consignee.

Consignment to -- -- a/c dr. To goods sent on consignment. (being the cost of goods consigned to the consignee) .Entry to consignors expenses. Consignment to ---- a/c dr. To cash a/c. (being expenses incurred on the consignment of goods to the consignee)

Entry for advance given by the consignee

B/R or bank a/c dr To consignees a/c (being a bill or bank draft received from the consignee as an advance against the goods consigned ) Entry for consignees expenses Consignment to ---- a/c dr. To consignees a/c (being expenses incurred by the consignee in connection with the goods consigned to him) Entry for sales by consignee Consignee a/c dr To consignment a/c (being the gross sales proceeds as per account sales)

Entry for consignees commission Consignment to ----- a/c dr To consignees a/c (being commission on sale of goods sent on consignment payable to consignee) Entry for remittances from the consignee in settlement of

account

Bank a/c or B/R a/c dr. To consignees a/c (being amount due from the consignee received) Entry for profit/loss on consignment 1)if there is profit on consignment Consignment to ------- a/c To profit and loss a/c (being profit on consignment transferred) 2)if there is loss on consignment Profit and loss a/c dr To profit and loss a/c (being loss on consignment transferred to profit and loss a/c)

Accounting treatment in the books of the consignee


Entry on receipt of goods by consignee
Consignors a/c dr To B/P a/c or bank a/c (being advance given to consignor against goods received from him)

Advance given by consignee to consignor


Consignors a/c dr To B/P a/c or bank a/c (being advance given to consignor against goods received from him)

Entry for sales by the consignee


Cash a/c dr Or Debtors a/c (if sold on credit) dr To consigners a/c (being goods sold on account of the consigner)

Entry for comission on sales consigners a/c dr To Commission a/c (being commission earned on sales of goods received on consignment) Entry for bad debts (i) if the consignee does not get delcredere commission Consigners a/c dr To debtors a/c ( being bad debts on a/c of sales of goods received on consignment debited to consigners a/c) (ii) when the consignee gets delcredere commission Bad debts a/c dr To debtors a/c (being bad debts treated as personal loss of the consignee because of getting del credere commission)

Entry for remittance sent to the consigner in final

settlement of his a/c

Consigners a/c dr To B/P or Bank a/c (being payment of the balance due to the consigner)

In the books of Ram of Delhi SURAT CONSIGNMENT ACCOUNT Dr To Goods sent on consignment 10000 By Shyam To bank (expenses) 270 To Shy am ( commission) 2070 To Shyam 250 To P & L a/c 1210 Cr 13800

SHYAMS ACCOUNT
To Surat consignment a/c 13800 By Surat consignment a/c By Surat consignment a/c By Bank a/c By Bank a/c 250 2070 5000 6480

Valuation of unsold stock


Unsold stock is valued at cost or market price , whichever

is less. While calculating the cost of stock , cost plus a proportionate share of non-recurring expenses is considered. Non-recurring expenses are the expenses which are incurred to bring the goods to the godowns of the consignee such as packing and forwarding charges,freight,octroi,duty,insurance in transit etc. Recurring expenses such as godown rent, storage, advertisement etc. incurred after the goods reachthe godowns of the consignee are not taken into consideration for the valuation of stock on consignment. Consignment Stock a/c dr To consignment to----a/c (being the value of stock on hand with the consignee)

On 1st January,2010 Rohit sends 150 sewing machines costing Rs.30000 to Anurag to be sold on behalf of the former at 5% comission on sales. Rohit paid Rs1500 as freight and carriage for sending the machines. Anurag sent the a/c sales on 31st March 2010 stating that: (i) 120 sewing machines were sold for Rs 27000 (ii) Expenses incurred on inward consignment: octroi Rs 250, carriage Rs50, godown rent Rs2100 and advertisement & other selling expenses Rs 1500 Calculate the value of consignment stock on 31st March 2010
No. of sewing machines cosigned

Less: No of machines sold No of machines unsold Cost price of 150 machines Rs 30000 Cost of 30 machines (30000/150 x 30) Add:Proportionate share of non-recuring Freight & carriage by Rohit Rs 1500 Octroi paid by Anurag Rs 250 Carriage paid by Anurag Rs 50 Therefore, expenses on 30 machines (1800/150 x 30) Value of consignment stock on 31-3-2010

150 120 30 6000

360

Invoicing Goods Higher than Cost


Goods sent on consignment a/c dr To consignment a/c (Being the excess of invoice price of goods sent on consignment written back) 2. Consignment a/c dr To consignment stock suspense or reserve a/c (Being the excess of invoice value over the cost price of unsold stock adjusted to write back the unsold stock at cost price) BALANCE SHEET Liabilities Assets Consignment stock a/c Less: Consignment stock suspense a/c
1.

Accounting for loss of goods


Normal loss
It is an unavoidable loss. It is caused due to inherent

Abnormal loss
It is an avoidable loss. It is caused by abnormal

nature of goods i.e. normal leakage or spoilage. It is treated as part of the cost. The value of such loss is not calculated separately. No treatment in a/c except its value is adjusted by increasing the cost per unit.

reasons such as fire, abnormal spoilage etc. It is not treated as a part of the cost. The value of such loss is calculated separately like the value of unsold stock. The value of such stock is credited to Consignment a/c in order to calculate the normal profit or loss on consignment.

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