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Principles and Practice of Accounting > Consignments > Accounting Entries in the Books of Consignor
Consignments

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

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.

 

Consignment Account

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 1st 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 31st 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
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