Meaning :- Consignment means sending of goods by the owner (manufacturer, producer or trader) to his agent who agrees to collect

and sell them on behalf of the owner usually on a commission basis. Features of consignment 1. Transfer of possession. 2. Relationship between consignor and consignee. 3. Risk of Loss. 4. Profit/Loss on sale of goods. 5. Consignees commission. 6. Reimbursement of consignees expenses. 7. Goods consigned and unsold appears as stock of the consignor. 8. Consignee is to take reasonable care of goods. 9. Bad debts. Important terms: 1. Consignment Expenses * * Non Recurring Expenses Recurring Expenses

2. Advance or Deposit from Consignee 3. Discounted Charges 4. Account Sales 5. Consignees Commission 6. Normal Loss 7. Abnormal Loss 8. Unsold stock.

Commissions Normal Commission Calculated as fixed percentage on sales Del-Credere Commission 1. Extra-Commission gives to consignee for bearing the risk of bad debts. 2. Consignor get full proceeds of sales both cash & credit, even if some of the customers do not make payment. 3. Calculated on total sales generally unless specified on credit sales. Over riding commission-paid as incentive to increase the sales.

Books of Consignor Consignment A/c Particulars To Goods sent on consignment A/c Rs. Particulars By Consignees personal A/c: Cash Sales To BankExpenses To Consignees personal A/c Expenses To Consignees personal A/c Commission To Consignees personal A/c Bad debts To Profit & Loss A/c Profit transferred Credit Sales By Goods sent on consignment A/c Returns by consignee By stock on consignment A/c unsold stock By Profit & Loss A/c Loss transferred

Consignees Account Particulars To Consignment A/csale proceeds Rs. Particulars By Cash/Bank/B/R A/c (Advance) By Consignment A/c Expenses of consignee Commission By Bank or balance c/d

Goods sent on Consignment A/c Particulars To Consignment A/c Goods returned To Purchaser or Trading A/c Transfer Rs. Particulars By Consignment A/c Goods sent

The goods sent by consignor to consignee are generally at a price more than the cost price called invoice price or loaded price i.e. cost price + profit margin. This is done so that the consignee does not sell the goods below the invoice price. But to calculated the profit in the consignment account, this load (Profit margin) should be removed & this is done by following entries: For removing the load or profit margin in the opening consignment stock balance. Stock Reserve A/c To Consignment A/c. Dr.

For removing load or profit margin in the goods sent on consignment account. Goods sent on consignment A/c To Consignment A/c

For removing load or profit margin in the closing consignment stock balance Consignment A/c To Stock Reserve A/c Dr.

For removing the load or profit margin in the goods returned by the consignee. Consignment A/c To goods sent on Consignment A/c The valuation of the closing stock unsold lying with the consignee is done at cost price or market price, which ever is less. Cost price of consignment stock is computed as under. Proportionate original cost of stock Dr.

+Proportionate expenses incurred by consignor

+Proportionate expenses incurred by the consignee in placing the goods in saleable

=Cost Price of Consignment Stock.

It should be noted that selling expenses and expenses such as insurance, salesmens commission, godown rent, advertisement, brokers fees are not considered in the valuation of consignment stock.

Basis
Transfer of ownership Parties Relationship Risk of loss of goods Return of goods.

Sale
Ownership immediately transferred to buyer Seller and Buyer Relationship is seller and buyer. Risk is passes to buyer with ownership and possession. Buyer dont have right to return. Seller prepare invoice only. After sale expenses are borne by buyer. No account sales is required

Consignm

Ownership rem consignor

Consignor and

Relationship is principal and a Risk is remain consignor.

Consignee can unsold goods.

Proforma invoice
Expenses Account sales

Consignor prep proforma invoi All expenses re consignment w borne by consi Account sales and to be sent consignee.