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Lecture 12. Consignment Accounting

This document provides an overview of accounting for consignment transactions. Key points include: 1) Consignment accounting involves goods sent by a consignor to a consignee to be sold on the consignor's behalf, with the consignor remaining the owner of the goods. The consignee sells the goods and remits the proceeds to the consignor after deducting commission and expenses. 2) Important terms in consignment accounting include goods sent on consignment, expenses incurred by the consignor and consignee, sales made by the consignee, commission due to the consignee, and amounts received from or remaining with the consignee. 3) The document outlines the

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Palash Kundu
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378 views

Lecture 12. Consignment Accounting

This document provides an overview of accounting for consignment transactions. Key points include: 1) Consignment accounting involves goods sent by a consignor to a consignee to be sold on the consignor's behalf, with the consignor remaining the owner of the goods. The consignee sells the goods and remits the proceeds to the consignor after deducting commission and expenses. 2) Important terms in consignment accounting include goods sent on consignment, expenses incurred by the consignor and consignee, sales made by the consignee, commission due to the consignee, and amounts received from or remaining with the consignee. 3) The document outlines the

Uploaded by

Palash Kundu
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Chartered Accountancy

CPT Course

Session 1, Section A
Fundamentals of Accounting

Lecture 12 Consignment Accounting


1

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.

Important Terns & Concepts

Transaction
Goods sent on consignment
Exp. Incurred by Consignor
Exp. Incurred by Consignee
For Sale done by Consignee
Commission due to
Consignee
Amount received from
Consignee
For unsold goods on
consignment
Transferring profit on
consignment
Transferring goods sent on
consignment to Trading A/c

Accounting Entry
Consignment to ___ A/c Dr.
To Goods sent on consignment A/c
Consignment to ___ A/c Dr.
To Cash/Bank A/c
Consignment to ___ A/c Dr.
To Consignee
Consignee
Dr.
To Consignment to ___ A/c
Consignment to ___ A/c Dr.
To Consignee
Cash/Bank A/c Dr.
To Consignee
Stock on Consignment A/c Dr.
To Consignment to ___ A/c
Consignment to ___ A/c Dr.
To P. & L. A/c
Goods sent on consignment A/c Dr.
To Trading Account

Quick Revision Notes


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.

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.

ICAI

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