Accounting Entries in the Books of Consignor

Consignment is a system where one person sends the goods to another so that the latter can sell those goods on behalf of the person who sends it in the first place. Risk related to goods will be on the part of the consignor. Let us study the consignment account in detail.

Browse more Topics under Consignments

• Meaning And Distinctions
• Normal and Abnormal Loss
• Accounting Entries in books of Consignee

Parties in Consignment Account

There are two parties in a consignment.

1. The person sending the goods is the consignor.
2. The person receiving the goods is the consignee.

Here, we will deal with the Consignment Account.

Accounting treatment in the Books of Consignor

The relationship between consignor and consignee is that of the principal and the agent. So entire profit or loss belongs to the consignor and consignee receives the commission as his remuneration.

On the consignment of the goods, the consignor also sends a Performa invoice. When the consignee remits money, he sends Account sale to the consignor.

 

Source: istockphoto.com

Read about the Accounting Entries in books of Consignee here in detail.

Journal entries in the books of Consignor

Date	Particulars		Amount (Dr.)	Amount (Cr.)
1.Entry for sending goods	Consignment a/c	Dr.	xxxx
	To Goods send on consignment a/c			xxxx
	(Being goods sent on the consignment basis)
2.Entry for consignor’s expenses	Consignment a/c	Dr.	xxxx
	To Cash/Bank a/c			xxxx
	(Being expenses for consignment)
3.Entry for consignee’s expenses	Consignment a/c	Dr.	xxxx
	To Consignee a/c			xxxx
	(Being expenses for consignment by consignee)
4.Entry for advance given by consignee	Cash/Bank/B.R. a/c	Dr.	xxxx
	To Consignee a/c			xxxx
	(Being receipt of advance)
5.Entry for sales	Consignee a/c	Dr.	xxxx
	To Consignment a/c			xxxx
	(Being sale of goods)
6.Entry for commission	Consignment a/c	Dr.	xxxx
	To Consignee			xxxx
	(Being commission recorded)
7.Entry for collection from debtors	No Entry
8.Entry for Bad Debts
(a)In the presence of Del-credre commission	No entry
(b) In the absence of Del-credre commission	Consignment a/c	Dr.	xxxx
	To Consignee a/c			xxxx
	(Being bad debts recorded)
9.Entry for the final profit	Consignment a/c	Dr.	xxxx
	To Profit and loss a/c			xxxx
	(Being transfer of profit to P&L a/c)
10.Entry for final remittance	Bank a/c	Dr.	xxxx
	To Consignee			xxxx
	(Being payment to consignee)
11. Entry for Balance in Goods sent a/c	Goods sent consignment a/c	Dr.	xxxx
	To Trading a/c			xxxx
	(Being balance transferred to trading account)
12.Entry for the closing stock	Consignment stock a/c	Dr.	xxxx
	To Consignment a/c
	(Being closing stock transferred)

 Solved Question For You

Q. Ram sent on 1^st April 2016 to Sham goods costing Rs. 100000 and spent Rs. 2000 on packing etc. On 3rd April 2016 Sham received the goods and sent his acceptance to Ram and given Rs.60000 as advance. Sham spent Rs.2000 on freight and cartage, Rs.1000 on godown rent and 600 on insurance. On 31^st Dec 2016, he sends his account sales( along with the amount due to Sham) showing that the sale is of 4/5 of the goods for Rs.110000. The terms of the consignment entitle Sham to a commission of 10 %. One of the customers turned insolvent and could not pay Rs.1200 due to him. Show the necessary general entries in the books of the consignor. Also, prepare ledger accounts.

 Ans.

Journal entries in the books of consignor

Date	Particulars		Amount (Dr.)	Amount (Cr.)
2016
April 1	Consignment to Sham a/c	Dr.	100000
	To Goods send on consignment a/c			100000
	(Being goods sent on the consignment basis)
April 1	Consignment  to Sham a/c	Dr.	2000
	To Cash/Bank a/c			2000
	(Being expenses on consignment)
April 3	Bank a/c	Dr.	60000
	To Sham			60000
	(Being receipt of advance)
Dec 31	Sham a/c	Dr.	110000
	To Consignment a/c			110000
	(Being sale of goods)
Dec 31	Consignment to Sham a/c (4000+1000+600+1200)	Dr.	6800
	To Sham a/c			6800
	(Being expenses incurred by Sham )
Dec 31	Consignment to Sham (10%on 110000)	Dr.	11000
	Sham a/c			11000
	(Being commission recorded)
Dec 31	Bank a/c	Dr.	32200
	To Sham			32200
	(Being receipt of amount)
Dec 31	Consignment Stock a/c (working note 1)	Dr.	21200
	To Consignment to Sham a/c			21200
	(Being unsold stock recorded)
Dec 31	Consignment to Sham a/c	Dr.	11400
	To Profit and loss a/c			11400
	(Being profit)
Dec 31	Goods sent on consignment a/c	Dr.	100000
	To Trading a/c			100000
	(Being balance transferred to trading account)

Ledgers Accounts

Consignment to Sham A/c

Date	Particulars	Amount		Date	Particulars	Amount
April 1	To goods sent on consignment a/c	100000		Dec 31	By Sham(sale proceeds)	110000
April 1	To Bank(expenses)	2000		Dec 31	By stock on consignment a/c	21200
Dec 31	To Sham(expenses &bad debts)	6800
Dec 31	To Sham(commission)	11000
Dec 31	To P&L	11400
		131200				131200

 Goods sent on consignment A/c

Date	Particulars	Amount		Date	Particulars	Amount
Dec 31	To Trading a/c	100000		Dec 31	By consignment to Sham a/c	10000
		100000				100000

Stock on consignment A/c

Date	Particulars	Amount		Date	Particulars	Amount
Dec 31	To consignment to Sham a/c	21200		Dec 31	By Balance c/d	21200

 Sham A/c

Date	Particulars	Amount		Date	Particulars	Amount
Dec 31	To consignment to Sham a/c	110000		May 3	By Bank	60000
				Dec 31	By consignment to sham a/c	6800
				Dec 31	By consignment to sham a/c	11000
				Dec 31	By Bank (Bal. Received)	32200
		110000				110000