8

Consignment Accounts
Learning objectives :
After going through this chapter you will be able to
 Understand the meaning of consignment and the meaning of terms related to consignment.
 Know the distinction between (a) Proforma Invoice & Invoice. (b) Consignment & Sale (c) Consignment & Joint
Venture
 Prepare Proforma Invoice and Account sale
 Follow accounting treatment of Consignment transactions in the books of Consignor & Consignee
 Understand the procedure of computation of Commission, Del-credere Commission & Overriding Commission
receivable by Consignee
 Know the procedure of valuation of unsold stock with consignee under different conditions
 Understand the treatment and valuation of Normal loss and abnormal loss of goods sent on Consignment
 Learn accounting procedure of goods sent on Consignment at cost price and at invoice price
 Understand the accounting for damaged goods, loss due to carelessness of Consignee and abnormal profit
 Learn accounting for fall in market price of stock, repairing charges on damaged goods and sale of damaged goods
 Calculate profit share and special commission of consignee
 Learn accounting procedure for conversion of Joint Venture into consignment

In these days of globalisation, advertisement and revolution in the means of communication the markets for
commodities have expanded from local level to international level. It is the ethical and social responsibility of
business to make available particular article to the consumer easily and timely. This is possible only when the business
set up agencies at different places. These agents can carry on different commodities to different markets easily.
It is necessity of market and to maximise the profit of business. This has given rise to consignment
business.
Meaning of Consignment :
When goods are sent by the owner or the Principal to his agent or any other representative on the condition of
selling goods on his behalf for which the later will be given commission at a specified rate as remuneration, it is called
consignment. The person who sends goods is called consignor. He is responsible for all profits and losses along with all
expenses and risk, if any.
Characteristics of Consignment
1. The goods are sent by the consignor to the consignee for the purpose of sale.
2. The relationship between the consignor and the consignee is that of Principal and Agent.
3. Consignment is not sale of goods.
4. Consignee acts as per the instructions of the consignor.
5. Consignee has the right to receive commission on goods sold.

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6. The rightful owner of goods is the consignor.
7. Consignee is the Bailee of goods. Security of goods is his responsibility.
Some main terms in Consignment
1. Consignment- When goods are sent by Consignor to Consignee for the purpose of sale on which he will be
entitled to receive commission it is called Consignment. In this , goods sent by consigner to consignee is called as
outward consignment and for consignee, it is inward consignment.
2. Consignor- The person who sends goods to the agent for the purpose of sale is called Consignor or the Principal.
3. Consignee- The person to whom goods are sent on Consignment is called Consignee.
4. Commission- On sale of goods the consignee is entitled to receive consideration called Commission. It is of
three types-
(a) Ordinary Commission- Consignee is given commissions on the selling Price of goods sold or it’s Invoice
price at a specified percentage. It is the remuneration of the consignee for work done.
(b) Delcredere Commission- If Consignee has been given the right to sell goods on credit by the Consignor,
there is the possibility of bad debts in such a case. This Loss is to be borne by the Consignor. In case the
consignee undertakes the responsibility for collecting the debts and to bear the loss of bad debt, or in
such a case, he will receive additional commission at a certain rate, which is called Delcredere
Commission. This commission is also calculated on total sale in the absence of any clear information.
(c) Over-riding Commission- If consignor gives right to consignee to sell the goods above invoice price, then
a commission is given on excess amount over actual invoice price called overriding commission.
5. Proforma Invoice – When goods are sent to the consignee, a Proforma Invoice in the form of an Invoice is sent wi
by the consignor. It contains particulars as regards name of goods, number or quantity or weight/measurement,
marking, packing etc, to identify the same. The necessary instructions are also given in it for selling goods at
Invoice price or at higher than invoice price along with the rate and type of commission.
6. Advance on consignment- If consignee sends some amount by cheque or bills receivable in advance prior to
sale to the consignor, then it is called as advance on consignment. If bills receivable is discounted by the
consignor; the amount written on debit side of Consignment Account is loss.
7. Account Sale- After selling the goods, documents containing details regarding quantity and quality of goods
sold, selling price, expenses incurred by him, his commission, details of advance given etc,. are mentioned. This
document is called Account sale.
Difference between Consignment and Sale

Basics of Difference Consignment Sale

(1) Relationship In consignment, two parties are consignor In sale, two parties are purchaser and
and consignee seller
(2) Ownership In consignment, ownership in goods remains In case of sale, ownership is transferred to
with the consignor. the buyer as soon as it is sold.
(3) Risk of Loss In consignment risk of loss and damage In sale of goods, the risk of loss or damage
remains with the consignor. is of the buyer.
(4) Consideration In case of consignment, consignee receives In case of sale of goods, the seller gets
commission as consideration. profit on sale.
(5) Particulars In case of consignment proforma invoice In case of sale of goods, invoice is given
is sent. to the purchaser.

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 Difference between Consignment and Joint Venture
Basis of Difference Consignment Joint Venture
(1) Relevant Act Rules regarding agency or mutual Mutual relationship rules are applicable.
relationship are applicable.
(2) Relationship In consignment relationship between two In Joint Venture, relationship between
parties is of consignor and consignee. co-venturers is like partnership.
(3) Capital In consignment, consignor contributes In Joint Venture generally all co-venturers
Contribution capital, not the consignee. contribute towards capital.
(4) Sharing of In consignment, profit earned belongs to In Joint venture, profit earned is shared by
Profit consignor only. all co-venturers.
(5) Period The period of working in consignment is Joint venture is a short time temporary
more than that of Joint Venture. partnership.
(6) Account Sale In consignment, after selling goods, In Joint venture, transactions related to
consignee sends account sale. himself are exchanged by all co-venturers.
Accounting Treatment of Consignment Transactions
Necessary Accounts required in the books of consignor Necessary Accounts required in the books of consignee
1. Consignment A/c 1. Consignor's A/c
2. Consignee's A/c 2. Commission A/c
3. Goods sent on Consignment A/c
4. Other accounts : Abnormal Loss A/c
Journal Entries Relating to Consignment Transactions
Transactions Books of Consignor Books of Consignee
(1) Goods sent on Consignment A/c Dr. No entry is passed when goods are
consignment To Goods sent on consignment A/c received.
(2) Expenses Consignment A/c Dr. No entry is passed for expenses incurred
incurred by To Cash/Bank A/c by consignor.
consignor
(3) Advance Cash/Bank/B/R A/c Dr. Consignor's A/c Dr.
received by To Consignee's A/c To Cash or Bank A/c
consignor
(4) If B/R Bank A/c Dr. No entry is passed when acceptance is
discounted by Consignment A/c (for discount) Dr. discounted by consignor.
Consignor To B/R A/c
(5) Expenses paid Consignment A/c Dr. Consignor's A/c Dr.
by consignee To Consignee's A/c To Cash or Bank A/c
(6) Goods returned Goods sent on Consignment A/c Dr. No entry is passed for returning goods to
by consignee To Consignment A/c consignor.
(7) Goods sold by Consignee's A/c Dr. Cash/Bank A/c (Cash Sales) Dr.
Consignee To Consignment A/c Debtor's A/c (Credit Sales) Dr.
To Consignor's A/c
(8) Amount of Consignment A/c Dr. Consignor's A/c Dr.
Commission To Consignee's A/c To Commission A/c
of consignee
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(9) Unsold Stock Goods with Agent A/c Dr. No entry is passed for unsold stock that
with Consignee or Unsold Stock A/c Dr. remained.
To Consignment A/c
(10) Balance Cash/Bank A/c Dr. Consignor's A/c Dr.
received from To Consignee's A/c To Cash / Bank A/c
Consignee
(11) Amount of Consignment A/c Dr. No entry passed in consignee's
Profit on To Profit & Loss A/c books.
Consignment
(12) For Loss on Profit & Loss A/c Dr. No entry is required in the books of
Consignment To Consignment A/c Consignee.
(13) Closing Goods Goods sent on consigment A/c Dr. No entry is required.
sent on To Trading A/c
Consigment A/c
(14) Transferring No entry Commission A/c Dr.
commission A/c To Profit & Loss A/c

Valuation of unsold stock

It is necessary to calculate the value of unsold stock so that such unsold stock is brought in the balance sheet of
the consignor Valuation of unsold stock is done as under-
(i) Actual value of unsold stock at cost price or market price, whichever is less.
(ii) Add proportionate expenses incurred by the consignor (such as freight, carriage on purchase, export and
import duties, loading charges).
(iii) Add proportionate expenses of non-recurring nature incurred by consignee such as freight on loading and
unloading, octroi, wages, insurance of goods in transit etc. .
Important Note:-
Expenses of recurring nature (such as warehouse expenses, establishment, carriage on sales, packing expenses,
godown rent or charges, advertisement, and other sale expenses) are not considered for valuation of unsold stock.
Simple rule is all such expenses, which are incurred to bring the goods into saleable condition and incurred by
consignee for bringing the goods upto the warehouse or godown are of non-recurring nature, which are considered
for valuation of unsold stock.
Illustration 1:
Mr. Kapil of Udaipur consigned to Mr. Bharat of Bhivadi on 1 June, 2016, 200 cycle @ `1,500 per cycle at cost.
Bharat accepted of ` 1,00,000 B/R on 3rd June 2016. Kapil discounted it from bank at ` 90,000 and paid ` 3,000 wages,
`2,000 railway freight and `1,000 packing expenses.
Bharat paid ` 1,000 for unloading, ` 500 octroi and ` 2,000 godown rent. Bharat received 5% general
commission and 2% delcredere commission. Bharat sold 100 cycles for cash at ` 1800 per cycle and 50 cycles on credit
@ ` 2000 per cycle. Bharat sent account of sale and after deducting expenses and commission on 30 June, 2016.
Prepare necessary journal entries in the books of Kapil & Bharat.
In the Books of Kapil (Consignor)
Journal
Amount (`)
Date Particulars L/F
Dr. Cr.
2016 Consignment A/c Dr. 3,00,000
Jan.,1 To Goods Sent on Consignment A/c 3,00,000
(200 Bicycles @ Rs. 1500 each sent to Bharat on consignment)
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Jan.,1 Consignment A/c Dr. 6,000
To Cash A/c 6,000
(Expenses paid by consignor)
Jan., 1 B/R A/c Dr. 1,00,000
To Bharat’s A/c 1,00,000
(B/R received from Bharat)
Jan., 3 Bank A/c Dr. 90,000
Consignment A/c Dr. 10,000
To B/R A/c 1,00,000
(Bill discounted from Bank)
Jan., Consignment A/c Dr. 3,500
30 To Bharat’s A/c 3,500
(Expenses incurred by Bharat)
June, Bharat A/c Dr. 2,80,000
30 To Consignment A/c 2,80,000
(Goods sold)
June, Consignment A/c Dr. 16,000
30 To Bharat’s A/c 16,000
(Commission charged by Bharat)
June, Unsold Stock A/c Dr. 77,250
30 To Consignment A/c 77,250
(Balance of unsold stock)
June, Consignment A/c Dr. 21,750
30 To P&L A/c 21,750
(Profit on Consignment transferred to P&L A/c)
June, Goods sent on Consignment A/c Dr. 3,00,000
30 To Trading A/c 3,00,000
(Goods sent on Consignment transferred to Trading A/c)
June, Cash A/c Dr. 1,60,500
30 To Bharat’s A/c 1,60,500
(Balance amount received from Bharat)

Ledger in the Books of Kapil

Consignment A/c
Date Particulars Amount (`) Date Particulars Amount (`)
2016 To Goods sent on 3,00,000 2016 By Bharat A/c (Sales) 2,80,000
Jan., 1 Consignment A/c June, 30 By unsold stock A/c 77,250
Jan., 1 To Cash A/c (Exp.) 6,000 June, 30
Jan., 3 To B/R A/c (Discount) 10,000
June,30 To Bharat’s A/c (Exp) 3,500
June,30 To Bharat’s A/c (Com) 16,000
June,30 To P&L A/c (Profit) 21,750
3,57,250 3,57,250

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 Bharat's A/c (Consignee's A/c)
Date Particulars Amount (`) Date Particulars Amount (`)
June, 30 To Consignment A/c 2,80,000 2016 By B/R A/c 1,00,000
Jan. 1
June, 30 By Consignment A/c 3,500
June, 30 By Consigment A/c 16,000
June, 30 By Cash A/c (b/f) 1,60,500
2,80,000 2,80,000
Goods Sent on Consignment A/c
Date Particulars Amount (`) Date Particulars Amount (`)
June,30 To Trading A/c 3,00,000 2016 By Consignment A/c 3,00,000
Jan., 1
3,00,000 3,00,000
Stock with Agent / Unsold Stock A/c
Date Particulars Amount (`) Date Particulars Amount (`)
June,30 To Consignment A/c 77,250 June,30 By Balance c/d 77,250
77,250 77,250
Working Note :
1. Calcucation of Commission
(1) Normal Commission 2,80,000 x 5/100 = ` 14,000
(2) Delcredere Commission 1,00,000 x 2/100 = ` 12,000
` 16,000
2. Unsold Stock / Stock with Agent : Balance Cycles (200 - 150) = 50
Price 50 x 1,500 = ` 75,000
Consignment Expenses (Proportionate) 6000/200 x 50 = ` 71,500
Agent Expenses (proportionate) 1500/200 x 50 = ` 71,750
` 77,250
In the Books of Bharat's (Consignee)
Journal
Amount (`)
Date Particulars L/F
Dr. Cr.
2016, Kapil’s A/c Dr. 1,00,000
Jan.,1 To B/P A/c 1,00,000
(Acceptance given to Kapil)
June, Kapils A/c Dr. 3,500
30 To cash A/c 3,500
(Expenses incurred)
June, Cash proceeds A/c Dr.
30 To Kapil’s A/c
(Sale proceeds received in cash) 2,80,000 2,80,000

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June, Kapil’s A/c Dr. 16,000
30 To Commission A/c 16,000
(Commission due)
June, Kapil’s A/c Dr. 1,60,500
30 To Cash A/c 1,60,500
(Balance amount remitted)
June, Commission A/c Dr. 16,000
30 To P & L A/c 16,000
(Commission transferred to P & L A/c)
In the Books of Bharat
Kapil's A/c
Date Particulars Amount (`) Date Particulars Amount (`)
2016 To B/P A/c 1,00,000 June,30 By Cash A/c 2,80,000
Jan., 1 To Cash A/c (exp.) 3,500
June 30 To Commission A/c 16,000
June 30 To Cash A/c (B/F) 1,60,500
2,80,000 2,80,000
Commission A/c
Date Particulars Amount (`) Date Particulars Amount (`)
June, 30 To P & L A/c 16,000 June, 30 By Kapil's A/c 16,000
16,000 16,000
Bearing the amount of Bad debts on credit Sales
1. When Delcredere commission is not allowed to the consignee the loss of bad debt will be borne by the
consignor.
2. When consignee is allowed Delcredere commission, the loss of bad debts will be borne by the consignee. The
amount of Bad debts will be debited in consignee’s commission A/c. The following entries are passed.
1. When Bad debt Loss is borne by consignor
Books of Consignor Books of Consignee
Consignment A/c Dr. with the Amount of Cash/Bank A/c Dr. (Amount received)
To Consignee's A/c Bad Debts Consignor's A/c Dr. (Bad debts)
To Consignment Debtors A/c (Credit Sale)
2. When Bad debt Loss in borne by the Consignee
No entry is passed for Bad debts. Cash/Bank A/c Dr. (Amount received)
Commission A/c Dr. (Bad debts)
To Consignment Debtors A/c (Credit Sale)

Loss of goods sent on consignment

When some of the goods sent on consignment are lost on the way or in transit or damaged or stolen, its
treatment in books depends on the nature and type of loss. Accordingly the loss may be normal or abnormal.
1. Normal Loss : When Loss is incurred due to the present nature of commodity and due to inherent nature of
commodity, which is unavoidable it is called normal Loss.
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 Accounting treatment : No entry is required to be passed for normal loss but the cost of remaining stock (good
stock) is inflated by the cost of units lost.
Cost of goods sent on consignment x units of unsold stock
Cost of unsold Stock =
Total numberof units (-) Units of Normal Loss
Illustration 2 :
Mr. Rakesh of Mumbai sent 2000 tons of Coal on consignment @ ` 300 per ton. Consigner paid `10,000 carriage
and ` 8,000 for wages. Consignee spent ` 2,000 for expenses. Mr. Deepak received 10 per cent less coal. Deepak sold
1500 ton coal @ ` 400 per ton. Calculate value of unsold stock.
Solution :
Units of Normal Loss = 2, 000 x 10% = 200
Remaining good units = 2,000 – 200 = 1, 800 tonnes. `
Total cost of 2,000 units dispatched by consignee 6,00,000
Add :Expenses Incurred by Consignor (10, 000 + 8000) 6,18, 000
Add : Expenses Incurred by Consignee 6,12,000
Total Cost of 2,000 tonnes 6,20,000
` 6,20,000
Cost of unsold Stock = x 300 (tonnes) = ` 1,03,333
1, 800
2. Abnormal Loss : The loss of stock which is due to carelessness or abnormal reasons is called abnormal loss.
This loss is calculated as under :
(a) Loss in Transit : (Loss of stock that occurred before goods reached consignee’s Warehouse) - In this case, to get
value of abnormal loss proportionate share of consignor’s expenses are added in the cost of stock lost.
Consignee’s expenses are not included.
(b) Loss of stock in Consignee’s Godown : In this case, value of abnormal loss is caluculated : the cost of goods
destroyed by adding proportionate expenses of the consignor as-well-as proportionate non-recurring (Direct)
expenses of the Consignee.
Accounting Treatment of Abnormal Loss of stock : This Loss is to be borne by the Consignor, as such, the
required entries will be passed in the books of the Consignor only.
(1) When Abnormal Loss Occurs
Abnormal Loss A/c Dr. Amount of Abnormal Loss
To Consignment A/c
(2) If stock is insured and insurance Company admits the claim
Insurance Company A/c Dr. With the amount of claim admitted
Profit & Loss A/c Dr. With the amount not admitted
To Abnormal Loss A/c Total amount of claim
Bank A/c Dr. Admitted claim received from Insurance Company
To Insurance Company A/c To Insurance Company
Illustration 3 :
Bharat Cycles Ltd. of Mumbai sent 400 cycles @ `200 per cycle to Chandra & Sons of Udaipur. Consigne paid
` 1,400 carriage and ` 600 for insurance. On the way due to truck accident 100 cycles are fully destroyed and only 1/4
of purchase price is received from them. Then Chandra & Sons sold 240 cycle @ ` 250 per cycle and sent the demand
draft after deducting ` 1,200 for octroi, ` 600 for sales expenses, and ` 2400 for his commission. Consignor got `
12,500 from insurance Co. for abnormal loss. Calculate the value of abnormal loss and unsold stock. (a) if abnormal
loss occurs in transit of goods (b) if abnormal loss occurs at consignee's godown.

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Solution :
(a) Calculation of amount of Abnormal Loss in Transit `
(1) Cost of 100 cycles = 100 x ` 200 = 20,000
2,000 x 100
Add: Proportionate Expenses of Consignor = = 500
400
Total Abnormal Loss 20,500
Less: Amount realized from destroyed cycles 2000 x ¼ x 100 = 5,000
Net Cost of Abnormal Loss 15,500
Less: Amount of the claim admitted & received
from Insurance company 12,500
Net Loss to be transferred to Profit & Loss A/c 3,000
(2) Value of unsold stock : 400 – 100 – 240 = 60 cycles
Cost price of 60 cycles @ ` 200 12,000
Add: Proportionate Expenses of Consignor ( ` 2,000 x 60) ¸ 400 300
1200
Add: Proportionate Expenses of Consignee (direct) x 60 240
300
Total Cost of 60 cycles 12,540
(3) Abnormal Loss occurs in Consignee’s Godown :
Cost of 100 cycles = 100 x `200 20,000
Add: Proportionate expenses of Consignor and Consignee 800
3,200 x 100
` 2,000 + 1,200 =
400 20,800
Abnormal Loss
Note: The Loss in Consignee’s Godown is due to carelessness of the consignee, so this loss will be borne by the
Consignee.
Illustration 4 :
On 1 January 2016, Himi Glass Works of Mumbai consigned to Parth of Bhilwara 100 cases at ` 16000 on cost. He
paid ` 1000 Railway freight,` 2000 wages. During transit 10 cases were lost and remaining cases were received by
Parth. He paid octroi ` 1000, sales expenses ` 500, godown rent ` 500. Parth sold 75 cases @ ` 200 per case. Parth
received 5% commission on sales and remaining amount was sent to consignor by consignee.
Prepare Consignment and consignee’s account in the books of Himi Glass Works.
Solution :
In the Books of Himi Glass Works, Mumbai
Consignment Account
Date Particulars Amount (`) Date Particulars Amount (`)
2016 To Goods sent on By Parth’s A/c (Sales) 15,000
Jan, 1 Consignment A/c 16,000 By Abnormal Loss 1,900
To Cash A/c (Exp.) 3,000 By Unsold Stock 3,017
To Parth’s A/c (Exp.) 2,000 By P & L (Loss) 1,833
To Parth’s A/c (Commission) 750
21,750 21,750

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(1) Computation of commission : 15,000 x 5% = ` 750
(2) Amount of Abnormal Loss : 10 cases x 160 = ` 1,600
Add : Proportionate Consignor’s Expenses = ` 300 x 10/100 = ` 1,300 = ` 1,900
(3) Unsold stock = 100 cases – 10 – 75 = 15 x ` 160 = ` 2,400
Add: Proportionate Exps. of Consignor = 23,000 x 5/100 = ` 2,450
Add: Proportionate Exps. of Consignee = `1,000 x 15/100 = ` 1,167
= `3,017
Parth's Account (Consignee's A/c)
Date Particulars Amount (`) Date Particulars Amount (`)
To Consignment A/c 15,000 By Cosignment A/c 2,000
By Cosignment A/c 750
By Bank A/c (B/F) 12,250
15,000 15,000
Illustration 5 :
Mayank Coal Co. consigned to Dhaval Sales Ltd. 1000 quintal coal @ `40 per quintal. He paid loading ` 500,
railway freight ` 3500. Dhaval Sales Ltd. sold 800 quintal coal @ ` 60 per quintal and paid sales exp. ` 1600, fire
insurance ` 200. Agent received 5% commission on sales, consignee reported a shortage of 20 quintals coal on the
whole consignment. Prepare Consignment Account in the books of Consignor and calculate the value of unsold stock.
Solution :
In the Books of Mayank Coal Co.
Consignment Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Goods sent on 40,000.00 By Dhaval & Sons 48,000.00
Consignment A/c (Sales) (800x60)
To Cash A/c (Exp.) 4,000.00 By Unsold stock 8,081.63
To Dhaval Sales Ltd A/c (Exp.) 1,800.00 (40000 + 4000)
x180
To Parth’s A/c (Commission) 2,400.00 980
To P&L A/c (Profit) 7,881.63
56,081.63 56,081.63

When goods are consigned at Invoice Price and Accounting

When goods are consigned by the consignor at Invoice Price, the following entries will be passed at invoice price:
(1) Goods sent on Consignment, (2) Unsold Stock (opening and closing both) (3) Abnormal Loss. But invoice price
includes profit also with the cost, means Invoice Price = Cost + Profit. Under such circumstances the effect of the profit
will have to be eliminated, only then correct profit on consignment would be known.
The following are the adjusting entries, which are to be passed so as to eliminate the effect oh Profit. The entries
will be passed in the books of the Consignor only :

1. For profit included in the net amount of goods Goods sent on consignment A/c Dr.
sent on consignment (Net value of goods = To Consignment A/c
Goods sent on consignment - Goods Returned by (With the difference between the invoice price
consignee) and cost price)

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 2. For amount of profit included in Opening balance Stock Reserve A/c Dr.
of unsold stock. To Consignment A/c
(With the amount of difference)
3. For profit included in closing balance of Consignment A/c Dr.
unsold stock. To Stock Reserve A/c
(With the amount of difference)
4. For profit included in the value of abnormal loss. Consignment A/c Dr.
To Abnormal Loss A/c
(With the amount of difference between invoice
price and cost price)

Note 1: While preparing Final Accounts, unsold stock will be shown at Cost Price : Invoice Price - Stock Reserve.
Note 2: In the absence of clear information about solving the problem at Invoice Price or Cost Price, students may
solve the question at Cost Price or at invoice price as they like.
Illustration 6 :
Krishna Engineering co. sent 500 Table Fans at @ ` 600 per fan to Suman Ele. Store at Invoice Price, which is 25%
above the Cost Price. Consignor paid ` 5,000 freight ` 2,000 packing charges. Consignee sent account of sale showing
sale of 400 fans @ ` 800 per fan and paid advertisement ` 1,000, godown rent ` 500. Consignee received commission
@ 5% on Invoice Price and 20% above on Invoice Price as additional commission. Prepare Consignment Account at
Invoice Price.
Consignment Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Goods Sent on 3,00,000 By Suman Ele. store 3,20,000
Consignment A/c (Sales) 400 x 800
To Cash A/c (Exp.) 7,000 By Goods Sent on 60,000
(5000+2000) Consignment A/c
To Suman Electric store 1,500 (300000 x 25/125)
A/c (Exp.) (1000+500) By Unsolod stock 61,400
To Suman Ele. store
General Com. 12000
Additional Com. 16000 28,000
To Stock Reserve A/c 12,000
To Profit & Loss A/c 92,900
4,41,400 4,41,400
Working Notes :
(1) Calculation of Commission
(i) Ordinary Commission on Invoice Price = 400 x 600 or ` 2,40,000, 5% of ` 2,40,000 = ` 12,000
(ii) Over riding Commission = Excess over Invoice Price 400 x ` 200 or 80, 000 x 2% = ` 16,000
` 28,000
(2) Value of unsold Stock = 500 – 400 =100 Fans x 600 = ` 60, 000
Add: Proportionate Expenses of Consignor : 7,000 x 100/500 = ` 61,400
Value of Unsold Stock ` 61,400

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(3) Cost of 100 Fans = 100 x 480 = ` 48,000
Add: Proportionate Expenses = ` 41,400
` 49,400
Therefore Stock Reserve = ` 61,400 – 49,400 = ` 12 000
Fall in Market Price of Stock
If the market price of unsold sock is less than its Cost Price, it will be valued at market price. It means if any goods
are lying either with the Agent or with consignor, its cost is reduced.
Illustration 7:
Mrs. Rekha of Bombay purchased 400 salvar suits @ ` 600 per suit and sent to Varsha of Jaipur 200 suits @ ` 900
per suit at invoice price. Consignor paid ` 5000 as expenses on consignment and consignee sold suits 150 @ ` 1000 per
suit in cash and paid sundry expenses ` 2500. Mrs. Rekha sold 120 suits at ` 900 per suit and paid sales expenses `
2000. Due to fall in market value, stock valued at 10% less then cost price. Consignee will get 5% general commission
and overriding commission @ 15% on excess amount received over ` 900 per suit.
Prepare in the books of Rekha, Consignment Account and Trading and P & L Account.
In the Books of Rekha of Bombay
Consignment Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Goods Sent on 1,20,000 By Varsha (Sales) 1,50,000
Consignment A/c By Unsold Stock 28,250
To Cash A/c (Exp.) 5,000
To Varsha (Exp.) 2,500
To Varsha (Commission)
General 7500
Overriding 2250 9,750
To Profit & Loss A/c 41,000
1,78,250 1,78,250
Working Notes :
(1) Computation of commission (`)
(i) General Commission `1,50,000 x 5% = 7, 500
(ii) Add over riding Commission ` 1,50,000 – (150 x 900) = 15,000 x 15% = 2,250
Total Commission 9,750
(2) Valuation of Stock with Agent
Cost of unsold Stock 50 x 600 = 30,000
Less fall in market price 10% = 03,000 = 27, 000
Add : Proportionate Exp. of Consignor `5,000 x 50 /200 = 01,250
28,250
Trading and Profit & Loss Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Purchases (400 x 600) 2,40,000 By Goods sent on 1,20,000
To Gross Profit 31,200 Consignment
By sales (120 x 900) 1,08,000
By closing stock at cost
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 80 x 600 = 48000
(-) 10% of 48000 4800 43,200
2,71,200 2,71,200
To Selling exp. 2,000 By Gross profit (Trading A/c) 31,200
To Net profit 70,200 By Consignment A/c (Profit) 41,000
72,200 72,200

Sale of Damaged Goods by Consignee

Illustration 8 :
Mr. Hitesh of Bangalore consigned goods to Mr. Mahesh of Ajmer on 1 January, 2015 for `30, 000 at cost price.
Consignor paid for carriage and insurance ` 900. Due to heavy rain fall 10% goods was damaged. Consignee paid
clearing charges ` 250, godown rent ` 200. On 20th February 2015 consignor received ` 2500 from Insurance
Company. Consignee sent Account sale showing that 2/3 of the remaining goods sold in cash for ` 35000 and received
` 500 from damaged goods. Consignee sent remaining amount through bearer. Consignee will receive 8% commission
on total sales.
Prepare in the books Hitesh, Consignment Account and Abnormal Loss Account.
In the Books of Hitesh
Consignment Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Goods sent on 30,000 By Mahesh's A/c (sales) 35,000
Consignment A/c By Abnormal Loss A/c 3,090
To Cash A/c (Exp.) 900 By Unsold Stock A/c 9,353
To Mahesh (Exp.) (250+200) 450
To Mahesh's A/c 2,800
(Commission 8% of 35000)
To Profit & Loss A/c 13,292
47,443 47,443
Working Note :
Valuation of Unsold Stock
Cost of total Stock ` 30,000
Add : Expenses of Consignor ` 900
` 30,900
Less : Abnormal Loss ` 30,900 x 10% ` 3,090
` 27, 810
Add : Non-recurring expenses of Consignee ` 250
Cost of total Goods for valuation ` 28,060
Value of Unsold Stock = ` 28,060 x 1/3 ` 9,353
Abnormal Loss A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Consignment A/c 3,090 By Mahesh (Sales of 500
To Mahesh (com.) 500 x 8% 40 Damaged goods)
By P & L A/c 130 By Bank A/c 2,500
3,130 3,130

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Illustration 9 :
Mr. Harsit of Ahemdabad consigned 300 sarees @ `225 per saree to to Gopesh of Udaipur at invoice price (cost
price ` 150 per saree). Harsit paid expenses ` 3000 on consignment. Harsit wrote a bill on Gopesh of ` 25,000 for three
months, which was accepted by him. Harsit discounts it from bank for ` 24,500. Gopesh paid octroi ` 900 and sold 250
sarees to Usha for ` 200 each, 20 sarees were stolen from godown, Gopesh is entitled 5% general commission, 2%
delcredare commission. Accounts are prepared at cost price.
Prepare Consignment Account, Gopesh Account, and Abnormal Loss Account in the books of Harsit and Harsit
Account in the books of Gopesh.
In the Books of Harsit
Consignment Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Goods sent on 45,000 By Gopesh A/c (Sales) 50,000
Consignment A/c (250 x 200)
To Cash A/c (Expenses) 3,000 By Abnormal Loss 3,260
To B/R (Discount) 500 By Unsold Stock 4,890
To Gopesh (Expenses) 900
To Gopesh (Commission)
Gen. Com. 2500
Del. Com 1000 3,500
To Profit & Loss A/c 5,250
58,150 58,150
Working Note : `
(i) Ordinary Commission (` 50, 000 x 5%) 2,500
Delcredere Commission (` 50,000 x 2%) 1, 000
Total Commission 3,500
(ii) Valuation of Abnormal Loss
Cost of Abnormal Loss of goods (20 x ` 150) 3,000
Add : Proportionate Exp. of Consignor (3,000 x 20)/300 3,200
Add : Proportionate Exp. of consignee (900 ¸ 300 = 3 x 20) 3,260
Value of Abnormal Loss 3, 260
(iii) Valuation of unsold stock (3000 – 2500 – 200 = 30 x `150) = 4,500
Add : Proportionate Expenses of consignor (`3,000 x 30) / 300 4,300
Add : Proportionate Expenses of Agent ` 900 x 30 / 90 = 4,390
Value of unsold stock 4, 890
Gopesh's A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Consignment A/c 50,000 By B/R A/c 25,000
By Consignment A/c 900
By Consignment A/c 3,500
By Balance c/d 20,600
50,000 50,000

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 Goods Sent on Consignment A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Trading A/c 45,000 By Consignment A/c 45,000
45,000 45,000
Abnormal Loss A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To Consignment A/c 3,260 By P&L A/c 3,260
3,260 3,260
In the Books of Gopesh
Harsit's A/c
Date Particulars Amount (`) Date Particulars Amount (`)
To B/P A/c 25,000 By Cash A/c (Sale) 50,000
To Cash A/c (Expenses) 900
To Commission 3,500
To Balance c/d 20,600
50,000 50,000

Share in Profit to Consignee or Special Commission

Illustration 10 :
Himi Garments of Bangalore sent goods to agent costing `33,000 at invoice price, which is 20% higher than cost
to Sheela Garments (Agent) of Ahmedabad on consignment. Consigner paid ` 1250 for insurance and freight. Agent
paid ` 250 as clearing charges and establishment expenses ` 750. Agent sold 3/4 of goods at cost plus 1/3 for profit.
Half of the remaining goods destroyed by the fire. Insurance company accepted the claim for ` 4,500, which is settled
at 90% of the said amount. Agent will get 5 percent commission on gross sales and, 3 percent delcredere commission.
He will also get 5% of the Profit as special commission (after deducting such commission). Prepare Consignment
Account, Abnormal loss account in the books of consignor. Consigner received balance amount from consignee
through bank draft. Accounting is done at invoice price. (Excluding abnormal loss).
Solution : Books of Consignor
Date Particulars Amount (`) Date Particulars Amount (`)
To Goods sent on 39,600 By Sheela Garments (Sales) 33,000
Consignment A/c By Goods sent on 6,600
33000 x 120 / 100 Consignment A/c
To Bank A/c (Expenses) 1,250 (39600 – 33000)
To Sheela Garments By Abnormal Loss 4,312.50
(Expenses) (250+750) 1,000 By Unsold Stock 5,137.50
To Sheela Garments 2,640
(Commission)
To Stock Reserve 825
To Sheela Garments
(Special Commission) 178
To Profit & Loss A/c 3,557
49,050 49,050

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Working Notes :
(1) Valuation of Abnormal Loss (1 - ¾ = ¼ x ½ = 1/8) (`)
Cost of Abnormal Loss = ` 33,000 – ¾ (Sale) ` 24,750 = 8,250 x ½ = 4,125.00
Add : Proportionate Expenses (Consignor ` 1,250 + consignee `250) = ` 1500 x 1/8 = 187.50
Total 4,312.50
(2) Valuation of Unsold Stock : Unsold Stock (½ of ¼ = 1/8)
Cost = ` 33,000 x 1/8 = ` 4,125 + Proportionate Expenses ` 187.50 = 4,312.50
Add : Stock Reserve (` 4,125 x 20%) = 825.00
Total 5,137.50
(3) Calculation of Sale: 33,000 x 3/4 x 4/3 = 33,000
(4) Computation of Commission
General Commission = 5% of ` 33,000 = 1,650
Delcredere Commission = 3% of ` 33,000 = 990
2,640
(5) Calculation of Special Commission and Net Profit :
Profit before charging such commission ( ` 49,050 – 45,315) 3,735
Less : Special Commission 5% of ` 3,735 178
Net Profit 3,557
Abnormal Loss Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Consignment A/c 4312.50 By Insurance Co. (4500 x 90%) 4050
By P&L A/c 262.50
4312.50 4312.50

Conversion of Consignment into joint Venture

Sometimes the Consignor and consignee take decision in the middle of the process of consignment that the
present relationship will be converted into Joint Venture hence the consignee in such a case will be entitled to receive
share in profit instead of commission. Unsold stock with consignee will be transferred to Joint Venture Account and
transactions will be recorded accordingly. It is called conversion of Consignment into Joint Venture.
Illustration 11 :
Swastik toys of Udaipur sent `40,000 toys to Manu toys of Salumber on consignment for sale, on the basis of 5%
commission. Consignor paid ` 4,000 for packing and carriage. Consignee paid ` 1,000 for carrying goods to godown.
Consignee sold 80% goods for ` 50,000 and paid remaining amount. Consignee denied to work on commission for the
remaining goods.
Consignor proposed to consignee for carrying business on joint venture by taking 1/3 share in profit and loss.
Consignee accepted it. Consignor sent goods worth ` 20,000 to Manu toys of Salmber on joint venture. Swastik toys
spent ` 2,000 and Manu toys spent ` 1,500. Manu toys retain the goods costing ` 1,500 at same value and remaining
goods sold at ` 40,000. Accounts are settled between both parties.
Prepare necessary accounts in the books of both the parties.
In the books of Swastik Toys
Consignment Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Goods sent on 40,000 By Manu Toys (sale) 50,000

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 Consignment A/c By Joint venture (Transfer
To Bank (Expenses) 4,000 to joint venture a/c) 9,000
To Manu Toys (Exp.) 1,000 (40,000 x 20%) + (5000 x 20%)
To Manu Toys (com.) 2,500
(5% of 50,000)
To P & L A/c 11,500
59,000 59,000
Joint Venture Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Consignment A/c 9,000 By Manu toys (sales) 40,000
(Transfer) By Manu toys (Goods Taken) 1,500
To Purchase (goods supplied) 20,000
To Bank A/c (expenses) 2,000
To Manu Toys (exp.) 1,500
To Profit on Joint Venture
P&L 6000
Manu toys 3000 9,000
41,500 41,500
Manu Toys Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Consignment A/c 50,000 By Consignment a/c 1,000
By Consignment a/c 2,500
By Bank a/c (b/f) 46,500
50,000 50,000
To Joint venture a/c (sales) 40,000 By Joint venture a/c (Exp.) 1,500
To Joint venture a/c (Exp.) 1,500 By Joint venture a/c 3,000
(Share of Profit)
By Bank a/c (b/f) 37,000
41,500 41,500
In the Books of Manu's Toys
Joint Venture Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Swastik Toys 9,000 By Bank A/c (sales) 40,000
(stock on consignment) By Purchase (stock taken) 1,500
To Swastik Toys 20,000
(Goods Supplied)
To Swastik Toys (Exp.) 2,000
To Bank a/c (Exp.) 1,500
To Profit
P&L 3000
Swastik Toys 6000 9,000
41,500 41,500
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 Swastik Toys Account
Date Particulars Amount (`) Date Particulars Amount (`)
To Bank A/c (expenses) 1,000 By Bank A/c (sales) 50,000
To Commission 2,500
To Bank a/c (b/f) 46,500
50,000 50,000
To Bank A/c (b/f) 37,000 By Joint venture (stock) 9,000
By Joint venture (Goods) 20,000
By Joint venture (Exp.) 2,000
By P&L A/c (Profit) 6,000
37,000 37,000
Repairs of Partially Damaged Goods
When some amount is spent for repairing damaged goods to bring them to saleable condition, the Journal entry
passed is as follow :
(1) The amount spent on repairing of such goods is treated as Consignment Expenses :
Consignment A/c Dr.
To Cash/Bank A/c
(Being repair charges incurred on partially damaged goods)
(2) Amount of Repairs to be included in the cost of damaged goods :
The cost of damaged goods will be enhanced by the amount spent on their repair to bring them to saleable
condition. In this case cost of Abnormal Loss will be determined by adding this amount in cost. In such a case, the
amount to be charged to Profit & Loss A/c will be :
Abnormal Loss to be debited to P & L A/c = Cost of Damaged goods + Amount of Repairs – Saleable Amount.
(3) If partly damaged goods become good units after repairing them :
It can be sold at price of good unit, then such amount is added in the cost of unsold stock.
Illustration 12:
Rajendra sent 100 fans @ `800 per fan to Narendra on consignment. Consigner paid ` 2000 for carriage and
other expenses. 20 fans are left unsold with consignee, out of which 8 are damaged. Repairs ` 1000 paid to make good
the damaged fans. Give the Journal entry for expenses on repairs, if :
(1) Repair expenses are treated as consignment expenses.
(2) Repair expenses included in the value of damaged goods and then the value of damaged fans is `400 per fan,
then calculate value of abnormal loss too.
(3) After repair the damaged fans can be sold as good fans, then calculate the value of unsold stock.
Solution :
(i) Consignment A/c Dr. 1000
To Cash A/c 1000
(Repair of partially damaged goods debited to Consignment A/c)
`
(ii) Cost of Abnormal Loss
Cost price of 8 Fans ` 800 each. 6,400
Add : Proportionate Expenses paid by consignor (2000 x 8/100) 160
6,560
Add : Repairs of damaged units 1,000

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 Total Cost of damaged stock 7,560
Less : Actual value of damaged fans 8 x ` 400 3,200
Abnormal Loss debited to P & L A/c 4,360
(iii) Value of unsold stock
Cost of 20 fans @ ` 800 each 16,000
Add : Proportionate Expenses paid by consignor (2000 x 20 / 100) 400
16,400
Add : Repairs of damaged units 1,000
Value of unsold stock 17,400

Summary
 Consignment : When goods are sent by the consignor to the Consignee for selling them and for which the later
will be entitled to receive commission, is called Consignment. Goods sent by consignor is called outward
Consignment and received by consignee is called Inward Consignment.
 Consignee : A party to whom goods are sent on consignment which is to be sold to consumers. Is also known as
Agent.
 Consignor : An owner of goods who dispatches goods on Consignment for sale. He is also known as principal.
 Advance on Consignment : This amount is paid by consignee to the consignor before the sale on Consignment
as security deposit for goods sent to him.
 Difference between Consignment and Sale : In consignment, ownership of goods lies with the consignor,
whereas in sale of goods ownership is transferred to buyer.
 Valuation of Unsold Stock : It is valued at cost price or market price, whichever is less. There after proportionate
expenses incurred by consignor and proportionate non-recurring expenses incurred by Consignee are added.
 Loss of Goods on Consignment : The loss may be normal or abnormal. There is no separate accounting
treatment for normal loss. The cost of normal loss is absorbed by good units. On the other hand Abnormal Loss
is valued and shown separately in Consignment A/c.
 Consignment of Goods at Invoice Price : When goods are consigned by the consignor at Invoice Price, in that
case the amount of profit remains included in the value of goods sent on consignment. For unsold stock and
Abnormal Loss, adjustment is made.
 Fall in market price of goods : In this case, unsold sock is valued at market price.
 Share in Profit to Consignee : Sometimes Consignor and consignee enter into agreement that the later will
receive some share in profit as a special commission in addition to other commissions. In this case consignment
A/c will be debited and Agent A/c credited with the amount of such share of profit.
 Conversion of Consignment into Joint Venture : Under this case unsold stock of Consignment will be transferred
to Joint Venture A/c and there after entries will be passed as in case of Joint Venture.
Glossary
(1) Account Sale : This is a document sent by Consignee to the Consignor after the sale showing details of gross sale
proceeds, the expenses incurred by him and the amount of commission charged etc.
(2) Proforma Invoice : When goods are sent to agent by Consignor, an informative raw-invoice is sent by consignor
to consignee, so that consignee will not sell the goods below such price.
(3) Consignment Account : During the process of goods sent by consignor to consignee, an account in prepared by
the consignor is called as Consignment Account.
(4) Delcredere Commission : This commission is allowed to the agent in order to cover the risk of loss due to bad
debts.
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(5) Additional Commission : It is an extra Commission in addition to ordinary Commission usually given for selling
goods above Invoice Price.
(6) Unsold Stock with Agent : The Stock of goods left after the sale by the consignee is called unsold stock or stock
with Agent. It is valued at cost or market price whichever is less and by adding proportionate direct expenses
incurred by Consignor and Consignee.
(7) Normal Loss: The loss of stock which is unavoidable, natural and is due to inherent nature of commodity is
known as normal loss.
(8) Abnormal Loss: When loss is caused by theft, fire, pilferage and abnormal breakages etc, it is called Abnormal
Loss.
Questions for Exercise
Multiple Choice Questions :
1. Nature of Consignment Account is:
(a) Real Account (b) Personal Account
(c) Nominal Account (d) Agent Account
2. What is the relation between consignor and consignee?
(a) Owner and Employee (b) Purchaser and Seller
(c) Princpal and Agent (d) Debtors and Creditors
3. The statement of Account, which is sent by the consignee after selling goods is known as :
(a) Invoice (b) Statement of Sale
(c) Account of Sale (d) Performa Invoice
4. In Consignment, while valuing remaining unsold stock with consignee, which proportionate expenses of
consignee are added :
(a) Octroi and Freight (b) Godown Rent
(c) Advertisement expenses (d) Sales expenses
5. Consignor sent goods to consignee on consignment, consignor paid 5% commission on invoice price and 20%
above on invoice price. Consignor sent goods worth `80000 at an invoice price of ` 100000. Which is sold for
` 1,10,000 the amount of commission for agent will be :
(a) ` 7, 000 (b) ` 8,000 (c) ` 10,000 (d) ` 5,800
6. Goods sent on consignment worth ` 12000 that is 20% above the cost price. The cost of such goods will be:
(a) ` 9,600 (b) ` 15 000
(c) ` 14,400 (d) `10,000
7. B/R received from consignee ` 10,000 consignor discounted from bank for ` 9,600. What entry will be passed
for discounting the bill ?
(a) Bank A/c Dr. ` 9,600
Discount A/c Dr. ` 400
To B/R A/c ` 10,000
(b) Bank A/c Dr. ` 9,600
To Consignment A/c ` 400
To B/R A/c ` 10,000
(c) Bank A/c Dr. ` 9,600
Consignment A/c Dr. ` 400
To B/R A/c ` 10,000

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 (d) Bank A/c Dr. ` 9,600
Discount A/c Dr. ` 400
To Consignment A/c ` 10,000
8. Ramesh sent 250 cycles @ ` 200 per cycles at invoice price to Naresh on consignment. It includes 25% profit on
cost price, consignor paid expenses ` 2000. Consignee informed that 50 cycles remain unsold, those cycles can
sell at ` 190 per cycle, what will be value of unsold stock :
(a) ` 9900 (b) ` 9500 (c) ` 8400 (d) ` 8000
Very Short Answer Type Questions :
1. What is difference between Delcredere Commission and Additional Commission?
2. What is Account sale? Who prepares it?
3. Give two differences between Invoice and Proforma Invoice?
4. An agent is entitled to get Delcredere Commission. What entry he will pass, if a bad debt due to credit sale
occurs.
5. Jitu sent goods on consignment at cost ` 10,000. He paid ` 1000 for carriage and insurance. Agent paid ` 2,500
for octroi and ` 400 for selling expenses. Agent sold 80% goods. Calculate value of unsold stock
Answer : ` 2,700.
6. Goods sent on consignment at cost plus 20%. Calculate the invoice value of goods costing ` 12,000.
7. Anil sent 50 fans box at ` 1,000 per fan to Sunil on consignment and paid ` 5,000 for consignment expenses. On
the way 5 fans was stolen. Sunil took the delivery of remaining fans and paid freight ` 800. Calculate the value of
abnormal loss.
Answer : ` 5,500
8. If consignee is not entitled for Delcredere commission and ` 1,500 due to debtor becomes bad, what entry will
be passed in the books of consigner for such bad-debts.
9. Goods lost from consignees godown worth ` 10,000. Insurance Co. accepted the claim for ` 9,000. In which
account such difference will be transferred.
10. 2000 Kg Gur sent on consignment @ ` 20 per Kg. 100 kg became abnormal loss. 1500 kg goods sold by
consignee. Calculate the value of unsold stock.
Answer : `8421
Short Answer Type Questions :
1. What are the differences between Consignment and Sale ?
2. Give two examples of Normal Loss and Abnormal Loss.
3. What are the differences between Consignment and Joint Venture?
4. What are the differences between Invoice and Proforma Invoice?
5. While calculating value of remaining goods with consignee, which expenses paid by agent are not added?
6. Chandra sent goods worth ` 50,000 at invoice price to Shakuntla by adding 25% profit on cost. Expenses for
sending the goods were ` 1000 and Shankuntla spent ` 2000 for receiving the goods. Consignee sold 4/5 part of
goods received by him. Calculate the value of unsold stock.
Answer : ` 8600
7. Vivek paid to Bhavesh 5% general commission on sale and 2.5% Del credere commission. Bhavesh sold goods
worth ` 60,000 including ` 40,000 on credit sales. What amount of commission Bhavesh will receive?
Answer : ` 4,000
8. 100 ton coal sent on consignment for ` 1300 per ton at invoice price and ` 800 per ton at cost price and consignor
paid ` 20000 for expenses. Agent sold 76 ton coal and paid ` 8000 for sales expenses. It is informed that 5 tons
coal is found less. Calculate the value of remaining stock with agent.
Answer : ` 19200.
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9. Mr. Harish of Mumbai consigned 20 items to Chain Singh of Jaipur at ` 1,800 per item at cost. He spent
` 2000 on consignment. On the way 4 items are destroyed. Insurance Co. accepted 80% claim. Consignee sold
destroyed goods at ` 1000. Calculate the value of abnormal loss.
Answer : ` 520
10. Ramesh sent 400 T.V. @ ` 1500 per T.V. at invoice price to Naresh on consignment. It includes 25% of cost.
Ramesh paid ` 2000 for sundry expenses. Naresh sold 350 T.V. at ` 1800 per T.V. and Naresh paid ` 1000 sales
expenses and ` 2000 advertisement expenses. Calculate the value of unsold stock.
Answer : ` 60250
EssayType Questions :
1. How valuation is done for unsold stock with consignee?
2. What do you mean by consignment? Explain with example various types of commissions given to
consignee.
3. Write the difference between accounting for goods on consignment at cost price and at invoice price. Explain
with examples.
Answer of Multiple Choice Questions
Question No. 1 2 3 4 5 6 7 8
Answer c c b a a d c c
Numerical Questions :
1. Mr. Bharat of Alwar sent goods to Kapil of Udaipur for ` 100000 on consignment and paid sundry expenses
` 20000. Kapil sent ` 60000 to Bharat in advance. Kapil paid wages and cartage ` 4000 and godown rent ` 3000.
Kapil sold all the goods for ` 1,60,000 in cash. 5% commission on sales is payable to consignee. Kapil sent
remaining amount to Bharat. Prepare Journal entries is the books of consignor and consignee and also prepare
necessary ledger accounts.
Answer : Profit on consignment ` 25,000.
2. Mr. Rakesh of Jaipur appoints Mr. Anil of Bhilwara as his selling agent. Rakesh consigned 100 mobile sets @ `
3000 each set to Anil. Rakesh paid expenses ` 2800 and Anil paid clearing charges ` 1200. Anil sold 70 mobile @
` 4000 each set in cash and 20 mobile sets @ ` 4200 each sold on credit. Selling expenses per mobile set ` 25
paid. Anil received 6% General commission and 3% Delcredere commission on credit sales. Prepare necessary
accounts in the books of Consignor and Consignee. Value of one set is being out of credit sales?
Answer : Consignment Profit ` 63790 Value of Unsold Stock ` 30,400.
3. Bharat Cycle Ltd. of Ajmer appointed Chandra Cycle Store Chitorgarh as his selling agent on the following terms.
(i) Goods to be sold at invoice price or over.
(ii) Chandra cycle store will be entitled to get commission of 5% on invoice price and 20% for commission on the
value above invoice price.
(iii) The principal to draw a bill on the agent for 2 months of 60% of invoice price.
600 cycles were consigned to Chandra cycle store Chittor for ` 200 per cycle, which was at invoice price ` 250 per
cycle. Chandra cycle store met his acceptance on due date. Chandra cycle store sold 540 cycles @ ` 280 per
cycle. His selling expenses were ` 1250 and he remitted the amount due by a Bank Draft. The balance stock was
valued at 80% due to damage caused by rains. Prepare the necessary ledger Accounts in the books of the both
parties.
Answer : Profit on Consignment ` 29,560.
4. The M. Coal Co. consigned to Mr. Rakesh Sales Ltd. 100 quintals of coal at invoice price of ` 40 per quintal. The

282
 company paid ` 0.50 per quintal for loading and ` 3.50 per quintal for Railway freight. An account sale was
received from Mr. Rakesh sales Ltd. showing 800 quintals coal sold at ` 60 per quintal, Sales expenses ` 1600,
insurance ` 200, brokerage @ 2% and commission @ 5%. The agent remitted the amount payable by a bank
draft and reported a shortage of 20 quintals of coal on the whole consignment. Prepare the necessary accounts
in the books of M. Coal Company.
Answer : Consignment Profit ` 6 921.63, Unsold Stock ` 8,081.63.
5. Krishna Glass Works of Mumbai consigned 100 cases of goods to his agent Chandan at ` 20000. It includes 25%
on cost price. They also paid freight ` 500 and insurance ` 1000. In course of transit 20 cases were lost and a
claim was made. A sum of ` 3200 was received from Insurance co. . The agent took delivery of remaining cases
and Chandan paid ` 800 custom dutiys, ` 80 octroi and ` 40 cartage.
Chandan rendered to their principal an account sale showing that 60 cases were sold for ` 14000 and paid
brokerage at 1.5%. The agent after deducting the expenses incurred by him and his commission at 5% on gross
sales proceeds, remitted the balance due by bank draft. Record the above transactions in the ledger of both
parties.
Answer : Consignment Profit ` 1,900, Abnormal Loss ` 300, Unsold Stock ` 3,730.
6. Kamal Traders consigned 2000 vegetable oil tin @ ` 1400 per tin at cost to Himanshi traders and paid railway
freight ` 20,000. In course of transit 100 tins was Stolen. A sum of ` 10,000 is received from insurance company
as a claim. Agent took delivery of remaining goods and paid to ` 19000 for octroi and ` 3000 as selling expenses.
He sold ` 1700 tins @ ` 1500 per tin and charged ` 20 per tin sold as commission. Prepare Consignment account
and Abnormal Loss account in the books of consignor.
Answer : Consignment Profit ` 99,000, Abnormal Loss ` 41,000, Unsold Stock ` 2,84,000.
7. Mr. Ram and Co. of Bombay consigned 1000 radio @ ` 500 per Radio on cost and ` 600 per radio at invoice price
to Mayank Radio Co. Ajmer. Mayank Radio Co. sold 700 Radios @ ` 750 per radio. In course of transit 50 Radios
damaged and agent claimed from insurance co. Agent received commission on invoice price at 10% and above
invoice price 25%. Accounting is made at invoice price. Prepare Consignment account in the books of consignor.
Answer : Consignment Profit ` 96, 250, Abnormal Loss ` 25, 000, Stock Reserve ` 25 000.
8. Mahesh sells goods on behalf of Vijay Sales Corporation on consignment basis. On 1 January, 2015 he had with
him a stock of ` 20000 on consignment. Mahesh had instructions to sell the goods at cost plus 25% and was
entitled to get a commission of 4% on sales in addition to 1% Delcredere commission on total sales for
guaranteed collection of all sale proceeds. During the year ended 31 December, 2015 cash sales were ` 120000
and credit sales ` 105000. Expenses paid by Mahesh related to the consignment ` 3000. Bad debts were ` 3000
and goods sent on consignment ` 200000. From the above particulars prepare Consignment Account in the
books of Vijay Sales Corporation.
Answer : Hint: Cost of Goods Sold ` 1,20,000 + 10,5000 = (2,25,000 x 100) 125 = ` 1,80,000, Consignment Profit
` 30,750, Unsold Stock ` 40,000.
9. Deepak of Delhi sent goods on consignment to Vivek of Ranchi and charged profit on proforma invoice price at
25% on cost. The agent received commission @ 7% plus 3% delcredere commission on sales made by him.
Stock with Agent at the beginning of the year was 20 bales at invoice price of ` 5000. The following transactions
took place during the year ended 31st December, 2015.
(i) 100 bales consigned at profroma invoice price ` 25000
(ii) Freight and insurance paid by Deepak ` 1000
(iii) Advance received from Vivek ` 10000
(iv) Sales made by Vivek : (a) 50 bales for cash ` 12500; (b) 40 bales for credit ` 10800
(v) Advertising expenses paid by agent ` 1200 and brokerage allowed by him ` 500
(vi) 15 bales were damaged in transit and ` 1400 received as compensation. The damaged cases were sold for
` 1100
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 (vii) ` 1500 could not be realized from credit sales.
(viii) The agent remitted the balance amount. Prepare necessary accounts in the books of Deepak.
Answer : Abnormal Loss ` 650, Commission ` 2,440, Unsold Stock ` 3,150
10. Bharat Store consigned goods worth ` 80000 at invoice price (cost price ` 60000) to Rajasthan Store. He paid
carriage and wages ` 500, freight ` 800 and insurance ` 600. The agent paid octroi and freight ` 200,Godown
rent ` 500 and fire insurance ` 500. Rajasthan Store sold goods ` 40000 on credit and ` 24000 for cash. Stock of
invoice price ` 16000 remains unsold. 5% commission on total sales and 3% delcredare commission on credit
sales is payable to consignee. Prepare Consignment Account in the books of Bharat Stores.
Answer : Consignment Profit ` 8,920; Unsold Stock ` 12,420
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