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Consignment Sales

• Freight Charges on units returned are charged against the sales of the same period, which

means that the numerator for computing the allocated freight charges for the period would be the

sold units plus units returned.

• Excessive freights are expensed.

• Administrative Costs are not allocated to Consignment Sales because it is neither practical nor

feasible to do so. Thus, Consignment Sales are usually overstated.

• Sight Drafts are like advances

• If expenses incurred increases the value of the units, then capitalize it i.e. repairs expense that

actually increase its value or bring the units into a salable condition!

• "ayable for consigned goods means remittance usually!

When answering problems

  #lways check if the givens are correct, so make sure to re$compute them i.e. commission, allocated

freight, and other allocated costs!

  Check if the given sales is e%ual to &sold units x sale price&, especially if there are more than two

sale prices.

7/21/2019 [P2] Consignment Sales - Quick Notes

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Consignor Consignee

'ebit Credit 'ebit Credit

Shipment of Goods

(Reverse if Goods are returned)Inventory on Consignment

Inventory ( Consignment

Shipments

None

(memorandum entr!

Related Expenses paid by

Consignor 

Inventory on Consignment Cash None

Related Expenses paid by

ConsigneeInventory on Consignment Consignee "ayable Consignor )eceivable Cash

 Advances by Consignor  Cash#dvances from

Consignee#dvances to Consignor Cash

 Advances by Consignee #dvances to Consignee Cash Cash#dvances from

Consignor

Excess Cash Remittance Cash #dvances fromConsignee

Cash remitted is less than the

amount in Account Sales Report Consignor )eceivable Sale

Sale of Merchandise None Cash Consignor "ayable

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oti!cation of Sale and

Remittance

Cash

Consignee "ayable

#dvances from Consignee

Commission *xpense

Sale Consignor "ayable

Cash

Consignor )eceivable

#dvances to Consignor

Commission )evenue

Recording of Cost of Goods Sold  Cost of +oods SoldInventory on

ConsignmentNone

)emittance

Sale Consignor "ayable!

ess-

o )elated *xpensed paid by Consignee

o #dvances to Consignor

o Consignees Commission

/et Income

Notes

Sale Consignor "ayable! Sold 0nits x Sales "rice!

ess-

o Cost of Consigned +oods Sold 0nits x Cost!

o "elated Expensed paid b Consignee

o "elated Expensed paid b Consignor

*xpensed as incurred except for Freight

Freight shall be allocated with the

numerator consisting of S#$D %N&'S AND

%N&'S "E'%"NED

o Consignees Commission 0sually as a percentage of sales