Understanding Consignment: Meaning, Working, and Journal Entries
Explore the concept of consignment in commerce, where manufacturers hire agents to sell goods on their behalf. Learn about consignment problems, solutions, and journal entries using a real-world example involving Raja Mills Ltd. and Fancy Stores in Delhi.
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Presentation Transcript
M.SREENIVASULU LECTURER INCOMMERCE
Now a day in order to increase sales, manufacturers hire agents who can sell their goods as it might not be possible for them to look after the debtors and the sales. So also in the case of consignment, the principal hires agents for different places for a commission. Hereby, we discuss the consignment meaning, working, features, pros, and cons.
Consignment: Problem and Solution # 1. Raja Mills Ltd. of Ahmedabad sent 100 pieces shirting to Fancy Stores, Delhi, on consignment basis. The consignees are entitled to receive 5 per cent commission plus expenses. The cost to Raja Mills Ltd. is Rs 600 per piece. Railway Freight, etc. Rs 1,000 Godown Rent and Insurance Rs 1,500 Raja Mills Ltd., draw on the consignees a draft for Rs 30,000 which is duly accepted. It is discounted for Rs 28,650. Later Fancy Stores, Delhi, report that the entire consignment has been sold for Rs 78,000. Show journal entries and the important ledger accounts in the books of the consignor.
