Consignment Accounts and its journal entries.pptx

A consignment account tracks the profit or loss from a business arrangement where a consignor sends goods to a consignee (an agent) to sell on their behalf. Ownership of the goods remains with the consignor until they are sold by the consignee, who earns a commission for their services. The account is used to calculate the financial outcome of this specific transaction, including all expenses and losses

1. CONSIGNMENT ACCOUNTS Presented by : Dr. R. Kavithamani Assistant Professor PG and Research Department of International Business

2. Meaning of Consignment Consignment means sending goods by the consignor (owner) to the consignee (agent) to sell on behalf of the consignor. Ownership remains with the consignor until goods are sold. Profit or loss belongs to the consignor.

3. Key Terms Consignor – Owner who sends goods Consignee – Agent who sells goods Proforma Invoice – Sent with goods showing details Account Sales – Sent by consignee showing sales, expenses, commission

4. Features of Consignment Goods sent to agent for sale Ownership retained by consignor Risk & reward lie with consignor Consignee earns commission, not profit Unsold goods = Stock on consignment

5. Types of Commission Ordinary Commission – Fixed % on sales Del Credere Commission – For bearing bad debts Overriding Commission – For achieving higher sales

6. Important Documents Proforma Invoice Consignment Note / Transport Document Account Sales Stock Report

7. Journal Entries in Books of Consignor Goods sent on consignment A/c Dr. To Goods A/c Consignment Expenses A/c Dr. To Cash/Bank A/c Consignee A/c Dr. To Consignment A/c (Sales) Consignment A/c Dr. To Consignee A/c (Commission) Stock on Consignment A/c Dr. To Consignment A/c

8. Journal Entries in Books of Consignee Cash/Bank A/c Dr. To Consignor A/c (Sales) Consignor A/c Dr. To Cash/Bank A/c (Expenses) Consignor A/c Dr. To Commission A/c ( Commission earned)

9. Valuation of Closing Stock Unsold goods valued at Cost + Proportionate expenses by Consignor and Consignee . Abnormal loss = Cost + Proportionate expenses up to loss point.

10. Consignment vs Sale CONSIGNMENT | SALE Ownership retained | Ownership transferred Principal–Agent | Buyer–Seller Goods returnable | Not returnable

11. Advantages of Consignment • Helps expand market • Reduces selling effort • Promotes local sales • Minimizes stock holding cost

12. Disadvantages • Risk of unsold goods • Delay in payments • Dependence on consignee honesty • Complex records

13. Summary • Consignment = Goods sent to agent for sale • Profit/Loss belongs to Consignor • Accounts involved – Consignment A/c, Consignee A/c, Stock A/c