CONSIGNMENT BUSINESS = A BUSINESS TO CAPTURE DISTANT MARKET AND TO SEE WHETHER IT WOULD BE PROFITABLE TO ESTABLISH OWN ESTABLISHMENT THERE. FORMAL DEFINITION: CONSIGNMENT IS THE DESPATCH OF GOODS BY ONE PERSON (CONSIGNOR) TO ANOTHER PERSON (CONSIGNEE) TO BE SOLD BY THE LATER, ON BEHALF AND AT THE RISK OF THE FORMER IN CONSIDERATION OF A COMMISSION

TWO PARTIES INVOLVED  CONSIGNOR  CONSIGNEE

ACCOUNT PREPARATION IN THE BOOKS OF CONSIGNOR  CONSIGNMENT ACCOUNT  GOODS SENT ON CONSIGNMENT  CONSINEE’S PERSONAL ACCOUNT  STOCK ON CONSIGNMENT  LOSS-IN-TRANSIT ACCOUNT

ACCOUNT DETAIL CONSIGNMENT ACCOUNT = PROFIT & LOSS A/C TO FIND PROFIT OR LOSS GOODS SENT ON CONSIGNMENT = TO SEE THE MOVEMENT OF GOODS CONSINEE’S PERSONAL ACCOUNT = TO FIND THE BALANCE DUE TO OR FRON CONSIGNEE STOCK ON CONSIGNMENT = TO SHOW THE STOCK UNSOLD LOSS-IN-TRANSIT ACCOUNT = TO RECORD LOSS ON CONSIGNMENT

TERMINOLOGY PROFORMA INVOICE – A STATEMENT CONTAINING THE DETAILS OF GOODS SENT, SPECIFICATION, QUANTITY ETC SENT BY THE CONSIGNOR TO THE CONSIGNEE IS KNOWN AS PROFORMA INVOICE ACCOUNT SALES- A STATEMENT SHOWING THE GOODS SOLD AS REDUCED BY THE EXPENSES OF THE CONSIGNEE, HIS COMMISSION AND THE BALANCE PAYABLE TO THE CONSIGNOR, SENT BY THE CONSIGNEE TO THE CONSIGNOR IS KNOWN AS ACCOUNT SALES. DEL-CREDERE COMMISSION- AN EXTRA COMMISSION GIVEN BY THE CONSIGNOR TO THE CONSIGNEE TO BEAR RISK OF CREDIT SALES.

STOCK VALUATION GENERAL PRINCIPLE OF STOCK VALUATION = COST PRICE OR MARKET PRICE WHICHEVER IS LOWER COST PRICE:RS ORIGINAL COST OF GOODS SENT--- ADD: EXPENSES OF CONSIGNOR --- ADD: EXPENSES OF CONSIGNEE A UNSOLD UNIT VALUE OF STOCK = X A TOTAL UNIT

VALUATION OF STOCK AT MARKET PRICE RS MARKET VALUE OF UNSOLD STOCK --- LESS: ALL PROBABLE MARKETING EXPENSES A MARKETING EXPENSES= SELLING EXPENSES, CONSIGNEE’S COMMISSION ETC

CONSIGNMENT ACCOUNT TO GOODS SENT ON CONSIGNMENT TO BANK A/C EXPENSES OF CONSIGNOR TO CONSIGNEE A/C -EXPENSES OF CONSIGNEE TO CONSIGNEE A/C -COMMISSION TO P/L A/C -PROFIT -OR TO PROFIT ON CONSIGNMNET ______ BY CONSIGNEE’S PERSONAL A/C BY STOCK ON CONSIGNMENT BY GOODS SENT ON CONSIGNMENT A/C -RETURN BY LOSS-IN-TRANSIT OR BY BANK A/C -INSURANCE CLAIM BY P/L A/C --- ______

GOODS SENT ON CONSIGNMENT A/C TO CONSIGNMENT A/C -RETURN OF GOODS TO TRADING/ PURCHASE A/C --- _____ BY CONSIGNMENT A/C -GOODS SENT ---______

CONSIGNEE ACCOUNT TO CONSIGNMENT A/C -SALES TO CONSIGNMENT -INSURANCE CLAIM --- BY CONSIGNMENT A/C -EXPENSES BY CONSIGNMENT A/C -COMMISSION BY BANK/BR -ADVANCE BY BANK/BALANCE C/D ---

LOSS-IN-TRANSIT A/C TO CONSIGNMENT A/C ---_______ BY BANK A/C BY P/L A/C --- ______