CONSIGNMENT ACCOUNT CONSIGNMENT ACCOUNT Nature of Consignment
Nature of Consignment
A trader sends goods to an
A trader sends goods to an agent to sell for him. These goods aagent to sell for him. These goods are sent on consignment.re sent on consignment. The
The ownership of goods still belongs to the traderownership of goods still belongs to the trader, therefore all profits on consignment, therefore all profits on consignment belongs to the trader.
belongs to the trader. The agent earns commissions, he is The agent earns commissions, he is NOT the owner, he is only NOT the owner, he is only thethe employee.
employee.
Consignment Terms Consignment Terms
Consignor: The
Consignor: The tradertrader who sends goods to the agent to sell for him.who sends goods to the agent to sell for him.
Consignee: The
Consignee: Theagentagent who receives the goods.who receives the goods. Account Sales: The statement prepared by the
Account Sales: The statement prepared by theagentagent (consignee) to tell the(consignee) to tell thetradertrader
(consignor), how
(consignor), how much goods much goods he sold. he sold. (( source document to trader) source document to trader) Commi
Commissionssions: s: SalarSalary earned by they earned by theagentagent (consignee) if he can sell goods.(consignee) if he can sell goods. Commissions are calculated on
Commissions are calculated on gross proceeds of sales.gross proceeds of sales.
Del Credere Del Credere Commission:
Commission: Additional commissionsAdditional commissions earned by theearned by theagentagent (consignee) if the agent if (consignee) if the agent if the bears the responsibili
the bears the responsibility of bad debts occurred. (Note: ty of bad debts occurred. (Note: If there is badIf there is bad debt, a del credere commission cannot be received by the consignee). debt, a del credere commission cannot be received by the consignee). Proforma
Proforma
IInnvvooiiccee : : A A ddeettaaiilleed id innvvooiicce e tthhaat t iinnffoorrmms s tthhe e ccoonnssiiggnneee e oon n tthhe e ddeessccrriippttiioon n oof f the
the
goods and the mini
goods and the minimum selling primum selling price for the goods. ce for the goods. This invoice doesThis invoice does
not
notcharge the consignee.charge the consignee.
CONSIGNOR’S RECORDS CONSIGNOR’S RECORDS
The primary object for preparing the consignment
The primary object for preparing the consignment account is to find the profit/loss onaccount is to find the profit/loss on each consignment
each consignment separately. separately. For that For that thetheconsignorconsignor prepares four (4) basic records:prepares four (4) basic records: 1.
1. GooGoods ds Sent Sent On COn Consonsignignmenment At Accoccountunt 2.
2. IndIndiviividual Codual Consinsignmgnment Ouent Outwatwards Ards Accouccountnt 3.
3. IndIndiviividual Cdual Consonsignignee Peree Personsonal Acal Accoucountsnts 4.
4. ProProfit fit & Lo& Loss oss on Con Consinsignmgnment Aent Accouccountnt 1: P
1: Personal consignment accounts for each consignee/Goods sent on Consignmentersonal consignment accounts for each consignee/Goods sent on Consignment toto distinguish one consignment from another. This account
distinguish one consignment from another. This account isiscreditedcredited with the original costwith the original cost of the goods.
Date Consignment Outwards to (name of consignee goes here) (cost of goods goes here) Goods sent on Consignment
$
2: Consignment outwards is a combined trading and profit and loss account relating solely to consignment.
Date (cost of goods goes here) Date Gross proceeds of Sales all expense of the consignor (from account sales) all expense of the consignee Stock (stock on hand to be
profit on consignment calculated) (transferred to the trading a/c)
Consignment Outwards to Consignee
2a) Stock on hand – It is not necessary that all consignment should be completed during the current year. If all consignment is not sold a value should assigned to it.This
calculation does NOT include selling expenses or commissions.
Original cost + consignors expenses + consignees expenses (except selling exp. & commissions) = Total value/Total cost.
Value of unsold stock = unsold quantity x total value total quantity
2b)Calculation of expenses – If all of the stock is not sold it is also necessary to allocate/spread out the cost of expense for the goods sold.
Expense for profit & loss = consignors expenses + consignees expenses (except selling exp. & commissions) = Total expense
Expense for profit & loss = amount sold x total expense amount consigned
3) Individual account of Consignees – These are opened for each agent and are debited with sales made, and credited with the consignee’s expenses and commissions.
Date Sales Date all expense of the consignee only (no unsold stock) (no expenses of the consignor)
4) Profit and Loss on Consignment – This account is also a comprehensive account and contains profits made on all consignments carried out during the trading period. The total of this is transferred to the profit and loss account at the end of the year.
Date Consignment - R.Rolly
(this amount is transferred from the consignment outwards account) Profit and loss on consignment
CONSIGNEE’S RECORDS
The consignee’s records are less involved and because he does not have to keep record of stock except by way of memorandum. The consignee records include:
1. Account Sales (source document for consignor) 2. Consignment Inwards Account
3. Debtors Account 4. Bad Debts Account
5. Commissions Received Account
1. Account Sales – to show the consignor amount of sales, all expenses paid for on consignment, and commission deducted. This will show how much money the consignee is remitting/sending to the consignor.
Consignee Name Nassau
Consignment of goods sold on behalf LAD Limited, Andros
Sales: 300 cases @ $15 each 4500 Payments:
Landingcharges 580
Sellingexpenses 120 700
3800 Commission at 5% on $4500 225
Del Credere Commission at 2% on $4500 90 315
Remittance/Bank draft/Cheque 3485
$ Account Sales
Date all expense of the consignee Date Cash Sales
all commisions go here Debtors (credit sales) balance c/d
Consignment Inwards from LAD Limited
3. Debtors Account – to record the consigned goods that was sold on credit.
Date Goods Date Cash received
Balance c/d Debtors Account
4. Bad Debts Account – to record the amount of consigned good that is uncollectable.
Date Debtor Date
Bad Debt Account
5. Commissioned Received Account – to record all commissions received from consignment.
Date Date LAD Limited Commission
Del credere Commissions Received Account
Consignment Account Worksheet
Multiple Choice
1. Kelly Jones, San Salvador, consigned goods originally costing $6 000 to Shelly Holmes in Nassau. Shelly paid and additional $250 for trucking, $180 insurance and $120 landing charges. There were 160 items in total. (BGCSE 2002)
What is the total value of the goods consigned? A. $6 000
B. $6 370
C. $6 430
D. $6 550
1b. If 40 items remain unsold, what would be the value of Kelly’s stock on hand? (BGCSE 2002)
A. $1 500.50
B. $1 592.50
C. $1 607.50
D. $1 637.50
2. A Consignee does not have to keep a stock record for goods consigned, except for memorandum purposes. Why is it not necessary for him to keep a record of stock? (BGCSE 2003)
A. The Consignee has sufficient details in the Account Sales B. The Consignee is only an agent and does not own the goods C. The Consignee must sell all goods in his possession
D. The Consignee owes the Consignor for unsold stock
3. When preparing Consignment accounts, the agent usually receives remuneration
(payment) for services in the form of a flat rate based on a percentage of the gross sales figure. What is this flat rate called? (BGCSE 2003)
A. Commission
B. Consignment commission C. Del credere commission D. Proforma commission
4. Which of the following statements correctly defines DEL CREDERE COMMISSION? (BGCSE 2004)
A. Additional payment to the consignee over and above regular commission B. Document sent by the consignee to the consignor giving details of the sales
commission
D. When goods are sent to an agent as commission 5. Which of the following is correct: (BGCSE 2005)
A. The Consignor is the person who owns the goods and sends them to the agent B. The Consignor is the person who receives and sells the goods
C. The Consignor is the person who receives the a del credere commission D. The Consignor is the agent who sells the goods
6. P. Taylor, a consignee, submitted an Account Sales to Terry’s Wholesalers, a consignor, showing that he had sales of 300 items at $25 each, Landing Charges $680, Duties and Taxes $1 200 and a 5% commission. How much should be indicated as the amount due to Terry’s Wholesalers? (BGCSE 2005)
A. $5 245 B. $5 620 C. $7 125 D. $7 500
7. P. Lowe ships goods $1 200, from New Providence on consignment to B. Dean in Long Island. Which entry should be made in the books of P. Lowe? (BGCSE May 2006)
DEBIT CREDIT
A. Goods Consigned Outwards Consignment to B. Dean, Long Island
B. Consignment to B. Dean, Long Island Goods Consigned Outwards
C. Goods Consigned Inwards Consignment to B. Dean, Long Island
D. Consignment to B. Dean, Long Island Goods Consigned Inwards
Question 8 to 11 refer to the following (BGCSE May 1997)
Peter Rollins of Bimini consigned 125 cases of fish to Charles Wells in Long Island on 1st
February 1997. Charles Wells is entitled to a commission of 5% on sales and an additional del credere commission of 2% on sales. The goods cost Peter Rollins $25 a case and he paid $80 in freight charges and insurance premiums of $30.
8
10
BGCSE June 2009
C. Prepare the accounts necessary to record these details in the books of the
