CONSIGNMENT ACCOUNT

Consignment: Consignment means the transaction of sending goods by one person to another, who is to sell those goods, on behalf of the first person. Consignor: The person who sends the goods is known as Consignor. Consignee: The person to whom the goods are sent is known as Consignee. Relationship: The legal relationship between these two persons is that of principal and agent. Outward/ Inward Consignment: The consignment is Outward Consignment for the person who sends the goods for sale and Inward Consignment for the person who receives the goods for sale Basis 1. Ownership in goods. CONSIGNMENT:

Ownership of the goods remains with consignor until the goods are actually sold. Consignee acts only as a custod SALES: Both ownership and possession are transferred to the buyer immediately after sale. 2. Relationship The relationship of consignor and consignee is that of principal and agent. In case of credit sales, the relationship of seller and buyer is that of creditor and debtor. 3. Statue Law of agency applies. Sale of Goods Act applies. 4. Commission Consignee is entitled to get commission based on agreement entered with consignor. Seller earns profit at the time of sale. No commission is given to the buyer. Accounts Sales
It is prepared and forwarded by consignee to consignor. It is sent at periodic intervals. It contains information about goods sold .

Proforma Invoice
it is prepared and forwarded by consignor to consignee

It is sent only once, when goods are sent on ton

It contains information about goods consigned

Account Sales
It is just a statement. It is prepared by consignee. It reflects the balance due to Consignor.

Consignment Account
It is a nominal A/c. It is prepared by consignor. it reflects the profit or loss on consignment.

. . Proforma Invoice Sales Invoice It cannot charge the consignee for value of the goods. It charges the buyer with the value of the goods. It may be prepared at Cost Price or at Invoice Price. It is always prepared at selling price. Recurring expenses Non-recurring expenses These expenses are incurred again and again. These expenses are not incurred again and again, but once. These expenses are incurred by the consignee after the goods reach his godown. These expenses are incurred in transferring goods from consignors godown to consignees godown. These expenses are not considered in Valuation of Unsold Stock. These expenses are considered in Valuation of Unsold Stock. Stock on Consignment Account Consignment Stock Reserve Account It is basically the closing stock in consignment business. It is amount of loading on Consignment Stock at the end. It is always shown as debit balance. It is always shown as credit balance