Transaction Accounting Entry

Goods sent on consignment Consignment to ___ A/c Dr. To Goods sent on consignment A/c

Exp. Incurred by Consignor Consignment to ___ A/c Dr. To Cash/Bank A/c

Exp. Incurred by Consignee Consignment to ___ A/c Dr. To Consignee

For Sale done by Consignee Consignee Dr. To Consignment to ___ A/c

Commission due to Consignee

Consignment to ___ A/c Dr. To Consignee

Amount received from Consignee

Cash/Bank A/c Dr. To Consignee

For unsold goods on consignment

Stock on Consignment A/c Dr. To Consignment to ___ A/c

Transferring profit on consignment

Consignment to ___ A/c Dr. To P. & L. A/c

Transferring goods sent on consignment to Trading A/c

Goods sent on consignment A/c Dr. To Trading Account

Chartered Accountancy Session 1, Section A CPT Course Fundamentals of Accounting

Lecture 12 – Consignment Accounting Quick Revision Notes

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Important Terns & Concepts

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Important Concept

1. Valuation of Stock: Stock should be valued at cost or net realizable value whichever is lower. In case of consignment, cost means: Cost of Goods to Consignor + Exp. incurred till the goods reach the premises of the consignee 2. Goods invoiced above cost: If goods are booked at higher than cost, the effect of loading must be removed by additional entries. Additional Entries: 1. Goods sent on Consignment A/c Dr. To Consignment to ____ A/c (reversing loading in goods sent on consignment) 2. Consignment to _____ A/c Dr. To Stock Reserve A/c (reversing loading in value of closing stock) 3. Abnormal Loss: 1. Find out the cost of the goods lost 2. Pass the entry: P. & L. A/c Dr. To Consignment to ______ A/c 4. Normal Loss: Spread over the entire consignment Cost per unit = Total Cost + Expenses incurred / Qty available after normal loss 5. Return of Goods from the consignee: Goods valued at the price at which it was consigned to consignee Exp. incurred by the consignee to send those goods back to consignor are not taken into consideration.

3 Points to be kept in mind

Consignor remains the owner of goods even after sending to consignee.

Consignor does not send any Invoice rather a Performa invoice.

The Amount of Sales belongs to Consignor.

All the exp. are to be borne by Consignor. If borne by consignee, recoverable from consignor.

Consignee entitled to Commission.

Consignee entitled to de-credere commission if he is responsible for bad debts.

Consignee sends a statement called Account Sales, periodically.

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Accounting Entries – In the books of consignee

Ignore: 1. Entries for Goods sent on Consignment; 2. Exp. incurred by Consignor.

Record: 1. Entries for advance sent by consignee to consignor; 2. Entries for making sales; 3. Exp. incurred by Consignee; 4. Earning Commission.

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