Understanding Consignment Sales and Journal Entries in Accounting
Learn about consignment agreements, the roles of consignor and consignee, journal entries for consignment transactions, handling cash advances, expenses, and commissions, as well as managing stock and profits in consignment sales. Find insights on handling discounts, bad debts, and final settlements in a consignment arrangement.
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Presentation Transcript
CONSIGNMENT CONSIGNMENT:- Manufacturer and wholesaler appoints as an agent in different part of his own country or in foreign countries To sell his good on commission basis.
CONSIGNMENT MEANING A Consignor is an owner of goods Consignee is an agent of the consignor The relationship between consignor & consignee is that of principal and agent. Consignment means dispatch of goods by the consignor to consignee for sale on commission basis on the risk & account of the consignor Ownership of goods does not passes over to consignee.
JOURNAL ENTRIES IN THE BOOKS OF CONSIGNOR For goods sent on consignment Consignment A/c______________Dr To goods sent on consignment A/c.. For expenses paid by consignor Consignment A/c_______________Dr To Cash/Bank A/c....
For receipt of cash/bill as an advance from the consignee Cash/Bank A/c________________Dr Bills Receivable A/c____________Dr To Consignee A/c . If the bill is discounted, the loss, of discount is generally charged to consignment for which an entry is passed. Consignment A/c______________Dr To Discount A/c .
For expenses incurred by and commission payable to Consignee. Consignment A/c______________Dr To Consignee A/c .. For Sales effected by Consignee Consignee s A/c_________________Dr To Consignment A/c .
If Del Credere Commission is not given, the entry for loss of bad debts will be. Consignment A/c_______________Dr To Consignee A/c For discount allowed to customer by consignee. Consignment A/c_______________Dr To Consignee A/c
For stock of goods lying with the Consignee Consignment A/c____________Dr To Consignment A/c.. For profit/loss on Consignment PROFIT LOSS Consignment A/c_________Dr To Profit& Loss A/c Profit & Loss A/c_________Dr To Consignment A/c
For receipt of cash/bill from consignee in settlement of their final dues Cash/Bank A/c___________________Dr Bills Receivable A/c_______________Dr To Consignee A/c . For closing the goods sent on consignment a/c Good Sent on Consignment A/c______Dr To Trading/Purchases A/c ------Thank you-----
