Edu-panel: consignment accounting

Consignment Accounts

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Definition of Consignment</h4>
<div align="left">
 
The word consignment can be generally defined 
 as the act of sending a quantity of goods by the manufacturers and producers 
 of one country or place to their agents in another at the risk of the 
 principals for the purpose of sale.</div>
<div align="left">
Goods so sent are known as "consignment". The 
 sender of the goods is called the consignor. Generally the manufacturers or 
 producers are consignors. The person to whom goods are forwarded for the 
 purpose of sale is known as the consignee. The consignment can be 
 classified as:</div>
<ol>
<li>

<div align="left">

 Outward consignment.</div>
</li>
<li>

<div align="left">

 Inward consignment.</div>
</li>
</ol>
<div align="left">
It is called "outward" when the dispatch  
 of a quantity of goods from one country to another is made for the purpose 
 of sale and is called "inward" when the receipt of the quantity of goods is 
 made for the purpose of sale. 
 
 
Goods sent on consignment do not become the 
 property of the consignee. He has not bought them. The ownership remains 
 with the sender or the cosigner. If the goods are destroyed, the receiver 
 (consignee) is not responsible. The loss will fall on the consignor. The 
 consignee tries to sell the goods according to the instructions of the 
 consignor. When the goods have been sold, he will deduct his expenses, 
 commission, etc., from the sale proceeds and the balance is remitted to the 
 consignor. The relationship between the consignor and the consignee is that 
 of principle and agent. The consignee is the agent. The consignee acts 
 entirely on behalf of the consignor. The consignee is entitled to his 
 remuneration which is generally fixed on the basis of a commission of sales. 
 The expenses incurred by the consignee must also be reimbursed by the 
 principal. It is important to remember that the consignee does not buy the 
 goods; he merely receives the possession of the goods.  
 
 
more................ 
 
<a href="http://edupenal.blogspot.in/2013/11/explanation-of-word-of-consignemnt.html">Explanation of word of consignment</a>  
<a href="http://edupenal.blogspot.in/2013/11/accounting-entries-in-books-of-consignor.html">Accounting Entries in the Books of Consignor</a> 
<a href="http://edupenal.blogspot.in/2013/11/accounting-entries-in-books-of-consignee.html">Accounting Entries in the Books of Consignee</a> </div>
</div>

Consignment Accounts

Definition of Consignment The word consignment can be generally defined as the act of sending a quantity of goods by...

Explanation of word of consignment

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Explanation of word of consignment</h2>
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Consign</div>
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Send / Give over to another for care or safekeeping.</div>
<div style="text-align: left;">
 
</div>
<div class="subheada" style="text-align: left;">
<div style="text-align: left;">
 Consignment </div>
<div style="text-align: left;">
The delivery of goods for sale or disposal.</div>
</div>
<div class="subheada" style="text-align: left;">
 
<div style="text-align: left;">
Consignor</div>
</div>
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The person sending the goods is called the "Consignor"</div>
<div class="subheada" style="text-align: left;">
 
<div style="text-align: left;">
Consignee</div>
</div>
<div style="text-align: left;">
The person receiving the goods and selling them is called the "Consignee"</div>
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<div style="text-align: left;">
 
<div style="text-align: left;">
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Consignor has ownership and risk in the goods</div>
</div>
</div>
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The ownership and thereby risk in the total stock is with the Consignor.
 The consignee holds the goods on behalf of the consignor. The 
consignor is responsible for the acts of the consignee in his status as 
an agent.</div>
<div class="subheada" style="text-align: left;">
 
<div style="text-align: left;">
Consignee is the Agent</div>
</div>
<div style="text-align: left;">
The consignee acts as the agent of the consignor only. The Consignee 
sells goods on behalf of the consignor and receives commission for his 
efforts. Any incidental expenses on the sale are to be reimbursed by 
the consignor or as agreed between them.</div>
<div class="subheada" style="text-align: left;">
 
Relationship between Consignor and Consignee is Principal - Agent relationship  
The Consignee acts in the status of an agent to the consignor, i.e. the 
relationship between the "Consignor" and the "Consignee" is that of 
"Principal and Agent". The transactions between them are governed by 
the agreement made between them as well as by the provisions of "The Law
 of Agency".</div>
</div>

Explanation of word of consignment

Explanation of word of consignm ent Consign Send / Give over to another for care or safekeeping. Consignmen...

Accounting Entries in the Books of Consignee:

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<table border="0" cellpadding="0" cellspacing="0" id="table417"><tbody>
<tr><td align="center" colspan="4" height="1" width="100%"><div align="left">
 
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Accounting Entries in the Books of Consignee:</div>
</td>
 </tr>
<tr>
 <td align="center" height="1" width="5%">
 (1)</td>
 <td height="1" width="75%">When 
 consignment goods are received:-</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">No entry is 
 made in the books of account. The consignee is not the owner of the 
 goods and therefore he makes no entry when he receives the goods.</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="2" width="5%"> </td>
 <td colspan="3" height="2" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="1" width="5%">
 (2)</td>
 <td height="1" width="75%">For expenses 
 incurred by the consignee:-</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">Consignor's 
 personal account</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">     
 To Cash account</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="2" width="5%"> </td>
 <td height="2" width="75%"> </td>
 <td valign="top"> </td><td align="center" height="2" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%">
 (3)</td>
 <td height="1" width="75%">When advance 
 is given:-</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">Consignor's 
 personal account</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">     
 To Cash or bills payable account</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="2" width="5%"> </td>
 <td colspan="3" height="2" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="1" width="5%">
 (4)</td>
 <td height="1" width="75%">When goods 
 are sold:-</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">Cash or bank 
 account</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">     
 To Consignor's personal account</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td colspan="3" height="1" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="1" width="5%">
 (5)</td>
 <td height="1" width="75%">For 
 commission due:-</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="0" width="5%"> </td>
 <td height="0" width="75%">Consignor's 
 personal account</td>
 <td valign="top"> </td><td align="center" height="0" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">     
 To commission account</td>
 <td valign="top"> </td><td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="0" width="5%"> </td>
 <td colspan="3" height="0" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" colspan="4" height="1" width="100%"><div align="left">
The consignor's account 
 will be closed by debiting it with cash or final bill or draft in 
 settlement.</div>
</td></tr>
</tbody></table>
</div>

Accounting Entries in the Books of Consignee:

Accounting Entries in the Books of Consignee: (1) When consignment goods are received:-...

Accounting Entries in the Books of Consignor:

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Accounting Entries in the Books of Consignor:</h2>

<table border="0" cellpadding="0" cellspacing="0" id="table417" style="border-collapse: collapse; height: 576px; width: 100%px;"><tbody>
<tr>
 <td align="center" height="19" width="5%">
 (1)</td>
 <td height="19" width="75%">On dispatch 
 of goods:-</td>
 <td height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">Consignment 
 account</td>
 <td height="39" rowspan="2" width="20%"><div align="center">
(With the cost of goods)</div>
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">     
 To Goods sent on consignment account</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td colspan="2" height="19" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%">
 (2)</td>
 <td height="19" width="75%">On payment 
 of expenses on dispatch:-</td>
 <td height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">Consignment 
 account</td>
 <td height="39" rowspan="2" width="20%"><div align="center">
(With the amount spent 
 as expenses)</div>
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">     
 To Bank account</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td colspan="2" height="19" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%">
 (3)</td>
 <td height="19" width="75%">On 
 receiving advance:</td>
 <td height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">Cash or bills 
 receivable account</td>
 <td height="39" rowspan="2" width="20%"><div align="center">
(With the amount cash or 
 bill)</div>
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">     
 To Consignee's personal account</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td colspan="2" height="19" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%">
 (4)</td>
 <td height="19" width="75%">On the 
 consignee reporting sale (as per A/S):-</td>
 <td align="center" height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">Consignee's 
 personal account</td>
 <td align="center" height="36" rowspan="2" width="20%">(With gross proceeds of sales)</td>
 </tr>
<tr>
 <td align="center" height="17" width="5%"> </td>
 <td height="17" width="75%">     
 To Consignment account</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td colspan="2" height="19" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%">
 (5)</td>
 <td height="19" width="75%">For 
 expenses incurred by the consignee (as per A/S):-</td>
 <td align="center" height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="18" width="5%"> </td>
 <td height="18" width="75%">Consignment 
 account</td>
 <td align="center" height="37" rowspan="2" width="20%"><div align="center">
(With the amount of 
 expenses)</div>
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">     
 To Consignee's personal account</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td colspan="2" height="19" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%">
 (6)</td>
 <td height="19" width="75%">For 
 commission payable to the consignee:-</td>
 <td align="center" height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">Consignment 
 account</td>
 <td align="center" height="38" rowspan="2" width="20%"><div align="center">
(With the amount of 
 expenses)</div>
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">     
 To Consignee's personal account</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td colspan="2" height="19" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" colspan="3" height="19" width="100%"><div align="left">
Assuming that all the 
 goods sent have been sold, the consignment account will show at this 
 stage the actual profit or loss made on it. The same is transferred to 
 profit and loss account.</div>
<div align="left">
 </div>
<div align="left">
The entry in case of 
 profit is: 
 </div>
</td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">Consignment 
 account</td>
 <td align="center" height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="19" width="5%"></td>
 <td height="19" width="75%">     
 To profit and loss account</td>
 <td align="center" height="19" width="20%"></td>
 </tr>
<tr>
 <td align="center" height="2" width="5%"> </td>
 <td colspan="2" height="2" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" colspan="3" height="1" width="100%"><div align="left">
In case of loss the 
 entry is: 
 </div>
</td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">Profit and loss 
 account</td>
 <td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">     
 To Consignment account</td>
 <td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="2" width="5%"> </td>
 <td colspan="2" height="2" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" colspan="3" height="1" width="100%"><div align="left">
Note: The 
 goods sent on consignment account may be closed by a transfer to trading 
 account. 
 </div>
</td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%"> </td>
 <td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" colspan="3" height="1" width="100%"><div align="left">
When Consignment is 
 Partly Sold:</div>
<div align="left">
When all the goods sent on 
 consignment have not been sold., the value of unsold goods in the hands 
 of the consignee must be ascertained and the profit or loss should be 
 found out by taking this stock into account. The entry is: 
 </div>
</td>
 </tr>
<tr>
 <td align="center" height="2" width="5%"> </td>
 <td height="2" width="75%">Stock on 
 consignment account</td>
 <td align="center" height="2" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td height="1" width="75%">     
 To Consignment account</td>
 <td align="center" height="1" width="20%"> </td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td colspan="2" height="1" width="95%"><hr color="#666666" size="1" />
</td>
 </tr>
<tr>
 <td align="center" height="1" width="5%"> </td>
 <td colspan="2" height="1" width="95%">
 Stock on consignment account is an asset and will be shown in the 
 balance sheet of the consignor. Valuation of stock is discussed on 
 valuation of stock page.</td></tr>
</tbody></table>
</div>

Accounting Entries in the Books of Consignor:

Accounting Entries in the Books of Consignor: (1) On dispatch of goods:- ...