Consignment

Consignment Introduction- Consignment means dispatch of goods by the consignor to consignee for sale on commission basis on the risk and account of the consignor.It is not sale by the consignor or purchase by the consignee. Importance of consignment-In the modern world of competition the importance of consignment is increasing.Day by day the area of market is increasing.Number of customers are on large scale.The manufacturer cannot reach up to the local markets.So he is in needs of salers .He appoints agents who will sale goods on commission basis.

Proforma Invoice Proforma invoice is a document prepared by consignor giving details about the goods send by him to consignee.In proforma invoice he gives information about consigned goods such as quantity of goods,value of goods means of transport,expenses paid by the consignor.As the consignor is not purchaser of goods he is only an agent to sell these goods on commission basis.

Account sales Account sales is a document prepared by consignee.Consignee sends accountsales to consignor giving information about sales made by him expenses incurred by him ,his commission,amount paid by him and balance due to the consignor.

Commission COMMISSION- The consignee is a commission agent of the consignor and as such he is entitled to receive commission on the goods sold by him as per agreement.Besides the sales commission at an agreed percentage on the gross sale proceeds,the consignee may be receives additional commissions. 1 Del Credere Commission: Del Credere commission is given by consignor to consignee to bear the loss of bad debts,if any,arising out of credit sales made by consignee. If there is no del credere commission the loss of bad debts is to be bear by the consignee. 2 Special Commission: Special commission is given by the consignor to the consignee to sell the goods at the maximum possible price. This commission is given on the sale proceeds exceeding the invoice price of the goods sold.

Journal Entries in the books of Consignor. For goods sent on consignment: Consibgment A/c Dr. To Goods sent on consignmrnt A/c (being goods sent on consignment) For expenses paid by consignr: Consignment A/c Dr. To cash/bank A/c (Being expenses paid ) For receipt of cash ,bill as an advance from consignee Cash/Bank A/c Dr. Bills Receivable A/c Dr. To Consignee A/c (Being advance ,bills receivables received by consignee)

If the bill is discounted by the consignor Consignment A/c Dr. To Discount A/c (being discount on bills recorded) For expenses incurred by and commission payable to consignee: Consignment A/c Dr. To Consignee A/c (Being expenses made by consignee)