53198868 Consignment Account Notes

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CONSIGNMENT ACCOUNT

Nature of Consignment

A trader sends goods to an agent to sell for him. These goods are sent on consignment.

The ownership of goods still belongs to the trader, therefore all profits on consignmentbelongs to the trader. The agent earns commissions, he is NOT the owner, he is only theemployee.

Consignment Terms

Consignor: The traderwho sends goods to the agent to sell for him.Consignee: The agentwho receives the goods.Account Sales: The statement prepared by the agentconsignee! to tell the trader

consignor!, how much goods he sold. source document to trader)Commissions: Salary earned by the agentconsignee! if he can sell goods.

Commissions are calculated on gross proceeds of sales"el CredereCommission: Additional commissionsearned by the agentconsignee! if the agent if

the bears the responsibility of bad debts occurred. Note: #f there is baddebt, a del credere commission cannot be received by the consignee!.

$roforma#nvoice : A detailed invoice that informs the consignee on the description ofthe

goods and the minimum selling price for the goods. This invoice doesnotcharge the consignee.

CONSIGNO!"S !ECO!#S

The primary ob%ect for preparing the consignment account is to find the profit&loss oneach consignment separately. 'or that the consignorprepares four (! basic records:

). *oods Sent On Consignment Account+. #ndividual Consignment Outwards Account. #ndividual Consignee $ersonal Accounts(. $rofit - oss on Consignment Account

): $ersonal consignment accounts for each consignee$Goods sent on Consignment todistinguish one consignment from another. This account is creditedwith the original costof the goods.


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"ate Consignment Outwards to

name of consignee goes here!

cost of goods goes here!

*oods sent on Consignment

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+: Consignment outwardsis a combined trading and profit and loss account relatingsolely to consignment.

"ate cost of goods goes here! "ate *ross proceeds of Sales

all e0pense of the consignor from account sales!

all e0pense of the consignee Stoc1 stoc1 on hand to be

profit on consignment calculated!

transferred to the trading a&c!

Consignment Outwards to Consignee

+a! Stoc% on hand & #t is not necessary that all consignment should be completed duringthe current year. #f all consignment is not sold a value should assigned to it. Thiscalculation does NOT include selling e'penses or commissions

Original cost 2 consignors e0penses 2 consignees e0penses e0cept selling e0p. -commissions! 3 Total value&Total cost.

4alue of unsold stoc1 ( unsold )uantit* ' total +alue total )uantit*

+b! Calculation of e'penses5 #f all of the stoc1 is not sold it is also necessary toallocate&spread out the cost of e0pense for the goods sold.

60pense for profit - loss 3 consignors e0penses 2 consignees e0penses e0cept sellinge0p. - commissions! 3 Total e0pense

60pense for profit - loss 3 amount sold' total e'pense amount consigned

! Indi+idual account of Consignees5 These are opened for each agent and are debited

with sales made, and credited with the consignee7s e0penses and commissions.

"ate Sales "ate all e0pense of the consignee only

no unsold stoc1! no e0penses of the consignor!

Consignee Account


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(! ,rofit and -oss on Consignment5 This account is also a comprehensive account andcontains profits made on all consignments carried out during the trading period. The totalof this is transferred to the profit and loss account at the end of the year.

"ate Consignment 8 9.9olly

this amount is transferred from the

consignment outwards account!

$rofit and loss on consignment

CONSIGNEE"S !ECO!#S

The consignee7s records are less involved and because he does not have to 1eep record of

stoc1 e0cept by way of memorandum. The consignee records include:

). Account Sales source document for consignor!+. Consignment #nwards Account. "ebtors Account(. ad "ebts Account;. Commissions 9eceived Account

). Account Sales &to show the consignor amount of sales, all e0penses paid for onconsignment, and commission deducted. This will show how much money the

consignee is remitting&sending to the consignor.

Consignee Name

Nassau

Consignment of goods sold on behalf A" imited, Andros

Sales:


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"ate all e0pense of the consignee "ate Cash Sales

all commisions go here "ebtors credit sales!

balance c&d

Consignment #nwards from A" imited

. #ebtors Account &to record the consigned goods that was sold on credit.

"ate *oods "ate Cash received

alance c&d

"ebtors Account

(. .ad #ebts Account5 to record the amount of consigned good that isuncollectable.

"ate "ebtor "ate

ad "ebt Account

;. Commissioned !ecei+ed Account5 to record all commissions received fromconsignment.

"ate "ate A" imited Commission

"el credere

Commissions 9eceived Account

Consignment Account /or%sheet

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question. (1 mark each)


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). elly Dones, San Salvador, consigned goods originally costing /E


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". Ghen goods are sent to an agent as commission

;. Ghich of the following is correct: *CS6 +


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Documents

53198868 Consignment Account Notes