Consignment accounting

Consignment accounting

Externalities should not take up any profit on the transaction until the goods have been actually sold by the consignee. Since the goods still belong to the consignor, any unsold goods in the hands of the consignee at the end of the trading period should be included in the monsignors stock. The recording of the consignment transactions in the books of the consignor and consignee will be made in the following manner.

Accounting Entries in the Books of Consignor: On dispatch of goods: Consignment account (With the cost of goods) To Goods sent on consignment account On payment of expenses on dispatch: (With the amount spent as expenses) To Bank account On receiving advance: Cash or bills receivable account (With the amount cash or bill) To Consignee’s personal account On the consignee reporting sale (as per ASS): Consignee’s personal account With gross proceeds of sales) To Consignment account For expenses incurred by the consignee (as per ASS):- (With the amount of expenses) For commission payable to the consignee: 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. The entry in case of profit is: To profit and loss account In case of loss the entry is: Profit and loss account Note: The goods sent on consignment account may be closed by a transfer to trading account.

When Consignment is Partly Sold: 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 Stock on consignment account 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. Accounting Entries in the Books of Consignee: When consignment goods are received: 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.


Please follow and like us:
Haven’t found the essay you want?