Ms.C.NANDHINI

ASSISTANT PROFESSOR

DEPARTMENT OF COMMERCE WITH CA

KONGUNADU ARTS AND SCIENCE COLLEGE

COIMBATORE – 641 029

It is usually a temporary partnership withoutthe use of a firm name.

It is limited to carryout a particular businessplan, in which the persons concerned agree tocontribute capital and to share profit (orlosses).

The parties in a joint ventures are known as co-venturers.

Their liability is limited to the ventureconcerned for which they agree to contributecapital and share profit or losses

Purchase and sale of goods

Joint consignment of goods

Speculation in shares

Underwriting of shares and debentures

Construction of a building, etc

1. It is a temporary partnership which comes to anend after the completion of a particular venture.

2. It is for a specific venture, so it is a particularpartnership.

3. The partnership is without the use of a firm name.

4. The main purpose it to make profit and todistribute it among all co- venturers. Loss, if any,will also be borne in agreed ratio or equally if noagreement regarding ratio has been made.

Relation between Parties:JV- Is that of owners.C- Is that of principle and agent.

Methods of maintaining Accounts:JV- Four methods of keeping accounts.C-Only one method of keeping accounts

Continuity of Relationship:JV- Is terminated as soon as the venture is

over.C- Will be there even after one transaction.

Profit earned:

JV- Belongs to the co- venturers.C- Belongs to the consignor and not the consignee.

Account Sales:

JV-Is not sent by one co- venturer to another.C- Is sent by the consignor to consignee.

Management:

JV-Co- venturers enjoy full powers to manage the businessC- The consignee being an agent has no powers except hehas to obey the instruction of the consignor.

Finance:JV- Money is contributed by all the co- venturers in

certain proportion.C-All money is invested by the consignor.

Ownership of Goods:JV- Is that of the co- venturers.C-Remains with the consignor though possession of

goods passes from the consignor to the consignee.

Risk:JV- Risk is shared between co- venturers.C- Sales are made at consignor’s risk.

Scope:JV- Wide as it covers many activities besides trade.C- Limited only for trade.

Name of the firm:JV- It is carried on without a firms name.P- Carried on with a firm name.

Co-Venturers/Partners:JV- Parties are called co-venturers.P- Parties are called partners.

Continuity:JV- Comes to an end after completion of a particular

venture.P- Continuous

Liability:JV- Limited to the venture concerned.

P-Unlimited to the extent of business and private estate.

Location of Business:JV- Generally Local.P-May be located at different places.

Position of a Minor:JV-Minor is generally not admitted.P-Minor can be admitted for benefits only.

Application of the Act:JV- No enactment is applicable.

P- Indian Partnership Act, 1932 is applicable.

No of Members:

JV- Number of members can be unlimited.

P- Limited to 20 in ordinary trade and 10 in bankingbusiness.

Following are the methods of recording in a Joint Venture:

i) When one of the co-venturer is appointed to manage the joint venture.

ii) When separate sets of books is not maintained.

iii) When separate set of books is maintained.

iv) When a joint venture transaction is recorded through the Memorandum Joint Venture Account.

A) When one co-venturer is appointed to manage the joint venture

B) When separate sets of books is not maintainedUnder this method, each co- venturer opens a joint

venture account and personal accounts of the other co-venturers.

C) When separate set of books is maintained

In this method, no individual co-venturer makes a record in his individualbooks but a complete set of double entrybooks is used for writing up joint venturetransactions.

The accounting treatment in thismethod is similar to that of partnershiptransactions.

This method is usually followedwhen the co-venturers are at the sameplace and when the joint ventureundertaken is sufficiently large.

D) Memorandum Joint Venture Account Method

This method is followed when eachco- venturer in a joint venture wants tomake a record of joint venture transactionsin his books.

This method is an alternative of (B)method and operates as follows:

i. Every co- venturer will open a personal account calledJoint Venture with-(name of the other co- venturer)Account.

ii In addition to the personal accounts, a MemorandumJoint Venture account is also opened to ascertain profitor loss.

iiiThe balance in Joint Venture with-… account will showthe amount due to or due from the other co- venturer.

CONSIGNMENT

Ms.C.NANDHINI

ASSISTANT PROFESSOR

DEPARTMENT OF COMMERCE WITH CA

KONGUNADU ARTS AND SCIENCE COLLEGE

COIMBATORE-641029

1. Meaning

2. Importance's

3. Name of party

4. Type of Commission

5. Consignment Expenses

6. Diff. b/w consignment and sale

7. Consignment Loss

8. Accounting treatment

9. Method of Accounting

10. Conclusion

CONTENTS

The producers cannot reach everywhere to

sell their produce. They reach their consumers l through the

wholesalers or retailers. They also hire other channels for

distribution of goods. The goods are also made available at different

places through the agents and agencies.

Generally it is seen that a producer or a

wholesaler appoints agents at different markets or in different parts

of the country to sell goods on their behalf against commission. One

such arrangement is consignment.

MEANING

Consignment helps producers to bring economies of large-scale

production with the increased sale. It facilitates high sale as a result of

which large scale of production is required and this leads to

economies of scale as large-scale production results to fall in cost per

unit.

It is more profitable for those manufacturers who are having

their branches at different places in domestic country or in other

countries. As in such situations, the local agents of that place have

much knowledge of that market as compared to the manufacturers. So

he facilitates more profitable sale by approaching local customers.

IMPORTANCE OF

CONSIGNMENT

Consignor also known as principal. he is producer of the firm who sends goods

to the agent to sale. he enjoy the right of ownership of goods until they are sold

by agent

Consignee is also known as agent. he is a person or firm who sells the goods

consigned to him against commission

NAME OF PARTY

Simple commission

Del - credere commission

Over riding commission

TYPE OF COMMISSION

1) Simple commission :- It is that commission which is paid to an

total selling the goods of consignor. It is calculated on total sales

(cash + credit).

2) Dell commission:- It is that commission which is given to

consignee for guarantee credit sale (full collection from debtors). It

is calculated on total sale unless otherwise stated in the question.

This commission given for taking the guarantee of credit sale.

3) Over riding commission :-It is that commission which is given for

selling the goods at a price higher than the normal selling price is

known as ‘surplus price’. It is calculated on surplus price at a given

rate .

Consignment expenses are those expenses that are to be

incurred by consignor and/or consignee for the goods sent on

consignment. They are of two types:-

1. Non recurring or direct expense:-Are those exp. Which are incurred

for a receiving the goods .They are paid only once when goods are

received like carriages, freight ,un-loading and loading.

2. Recurring or indirect expense:- Are those exp. Which are paid by

consignee for selling the goods. They are in recurring nature like

godown/shop rent advertisement insurance premium etc.

CONSIGNMENT EXPENSES

1. Name of parties

cogt - 1) Consignor 2) consignee

Sale - 1) Seller 2) buyer

2. Relationship

cogt - principal and agent

Sale - debtor and creditor

Difference between Consignment and

Sale

3.Return of goods

cogt - Consignee has the right the goods in case he is not in possession

to sell them.

Sale - In case of sale goods one for can not be return to the seller.

4.After delivery expense

cogt - In consignment after delivery expenses are born by consignor

those paid by consignee

Sale - In case of sale after delivery expense are born by buyer

5.Return or reward

cogt - In case of consignment the whole profit belong to consignor.

Consignee gets commission only

Sale - In case of sale the whole profit belong to seller it is not shared

Buyer

6.Transfer of risk

cogt - in Case of consignment risk is not transferred any loss or

damages to the goods will be born by consignor

Sale - In case of sale risk is transfer from seller to buyer any loss or

damages to the goods will be born by buyer.

The goods sent by consignor to consignee may suffer

two type loss:-

1. Normal Loss 2. Abnormal Loss

1.Normal Loss :-It is that loss which arise due to

nature of goods or types of goods.

This loss cannot be fully check or no

fully control. FOR EXAMPLE:- loss of coal due to

loading and unloading

CONSIGNMENT LOSS

2.Abnormal Loss:-Its that loss which aries due to negligence or

carelessness. This loss can be fully check or control. This loss can

divided into two parts :-

a) loss in transit b)loss at consignee place

a)Loss in transit:-It is that types of abnormal loss which arises

when the goods are on the way from consignor to consignee FOR

EXAMPLE:-goods may be damages in transit due to accidents.

b) Loss at consignee place:-It is that types of abnormal loss which accurse

(take place) after reaching the goods to consignee for example :- goods

may be destroyed by fire

Books of Consignor Books of consignee

1. Consignment a/c 1. Consignor a/c

2. Consignee a/c 2. Commission a/c

3. Goods sent on consignment a/c

ACCOUNTING TREATMENT

Generally there are two different methods of preparingaccounts relating to the consignment of goods. These are (1) CostPrice Method and (2) Invoice Price Method. These two methodsare described as under:-

1. Cost Price

Under this method, entries relating to consignment inthe books of consignor are passed with the actual cost of goods andamount spent or expenses incurred by him.

2. Invoice price :-

when consignor sent to the goods to consignee atinvoice price (not at cost price) invoice price is normal selling pricewhich is

cost price + profit.

consignment at invoice price (I.P)

cost price + profit = I.P

(100 + 50) =150

METHOD OF ACCOUNTING

It is not always possible that total stock of consigned

goods is sold out by consignee. Some stock can remain unsold

with the consignee. These goods that remain unsold with the

consignee are known as consignment stock.

Their valuation is required to record such consignment

stock in the balance sheet of consignor. This stock that is left

with the consignee is valued at cost price or market price

whichever is less.

VALUATION OF STOCK

VALUATION OF STOCK