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ACKNOWLEDGMENT

We, the researchers, would like to extend our thanks and gratitude to the following persons

for their utmost guidance and support:

Dr. Lino C. Reynoso for his enlightening lectures and directions about the proper writing

of this thesis paper

!rof. "el#iel $ndag %mba, our ad&iser, for sharing his expertise to us and guiding us to

make this paper as accurate as possible

!rof. $mir '. $uditor, for pondering our ideas and gi&ing some extra ad&ices regarding the

content of this paper

Dr. "a. (eronica )oy ". *inuya, Dean of College of $ccountancy and "anagement, for

her comments and suggestions that further rectify the flow of our paper

+ur parents, for their genuine support and understanding while we are working on the

content of this paper

$nd abo&e all, our Lord, ather $lmighty, for gi&ing us strength, wisdom, courage and

tenacity that made us sur&i&e circumstances which tested our knowledge and patience while

working on this paper. Without -is presence, we, the researchers, would not accomplish this

reuirement.

We dedicate this paper to all of you/ 'o 0od be the glory/

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RESEARCH ABSTRACT

Research 'itle : C+12301"%1' !R$C'3C%2 + 2%L%C'%D

413(%R23'5 *++62'+R%2 31 1$'3+1$L

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2'4D5

Researchers : D$1 !$4L C. *%0$2

R%17 "3C+ . C+R+1$

C-R32'31% $10%L$ *. CR47

$LL$13$- -. "$C$8$L31

R%D C-R32'3$1 L.

!$L42'R%

Degree Conferred : *$C-%L+R + 2C3%1C% 31 $CC+41'$1C5

2chool : "$13L$ '5'$1$ C+LL%0%2

$d&iser : !R+. "%L73%L $1D$0 %"*$, C!$

Date Completed : %*R4$R5 9;<

1o. of pages : ;=> pages

Consignment is a topic in accounting that is barely tackled by the students which in

contrary, it poses important notes needed to be ?otted down. 'he researchers want to ha&e a

specific study about the consignment topic and help other persons to raise awareness about the

entire system of consignment in where there are also issues that are needed to be address

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regarding some material misstatements, updates of in&entories and of course the internal control

issues of consignment. 'he researcher also intends to gather the data about the bookstores@

consignment practices and compare and contrast them. 'he ob?ecti&es of the study is to group

the bookstores according to years of operation determine the le&el of adherence on the

prescribed consignment practices of uni&ersity bookstores that employ consignment determine if

there is a difference in the consignment practices of uni&ersity bookstores that employ

consignment when they are grouped according to years of operation recommend results and

identify topics for future research.

'he study used uantitati&e, descripti&e approach to in&estigate the adherence of selected

uni&ersity bookstores employing consignment. 'he population will be all personnel of all

uni&ersity bookstores that employ consignment in the whole !hilippines. With its wide scope,

population will be narrowed down using the following criteria, as purposi&e sampling is used:

A;B the uni&ersity should be located within 1CR area A9B the enrollment per program per year

should be at least ; AB the personnel should ha&e knowledge on both accounting and internal

control of the uni&ersity bookstore@s consignment practices and AB each uni&ersity bookstore

should ha&e four AB representati&es.Euestionnaire will be utili#ed as a tool for gathering data. 3t

is an adapted uestionnaire using different standards and pronouncements about consignment

accounting and internal control. 'he tool consists of eight parts one for the demographics and

se&en for the consignment practices with fi&e uestions each form a combination of accounting

and internal control pro&isions. 'he first part of the uestionnaire will represent the first specific

problem, FWhat is the profile of uni&ersity bookstores in terms of years of operationG@@ 'he

second part of the uestionnaire will represent the second specific problem, FWhat is the le&el of

adherence on the prescribed consignment practices of uni&ersity8 bookstores in terms of: AaB

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deli&ery of goods AbB risk of loss, damages and confusions AcB efforts to sell AdB payment, sales

and commission AeB return of products AfB termination and AgB legal itemsGH Results from the

first part of the uestionnaire were tallied together in a freuency table used to create charts.

Results from the second part of the uestionnaire were tallied together by dimension. or each

statement item, the following are the pointing system: AB $dhere, A9B $dhere with Limitations

and A;B 1ot $dhere. rom thirty fi&e A=B uestions, mean will be computed for e&ery dimension

of consignment practices, and the result will ser&e as adherence of the sample to the prescribed

consignment practices.$n o&erall mean was computed for e&ery dimension. 2tandard de&iation

and coefficient of &ariation are used to measure how each response drastically change from one

to another which should not be high, in the sense that each uestions are related to each other all

reuiring the same degree of response.

'he findings show that most of the respondent with sixteen A;

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3t is therefore recommended for the ;8= years group to further impro&e adherence the first

and fourth statement in the deli&ery of goods practices, third statement in the risk of loss,

damages and confusions practices, first and third statements in the efforts to sell practices,

second and third statements in the payment, sales and commission practices, fourth statement in

the return of products practices, fourth statement in the termination practices, and first statement

in the legal items practices. 3t is therefore recommended for the

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TABLE OF CONTENTS

$cknowledgement i

Research $bstract ii

'able of Contents &i

List of 'ables &iii

List of igures ix

List of $ppendices ix

CHAPTER PAGE

I PROBLEM AND ITS BACKGROUND3ntroduction ;

*ackground of the 2tudy 9

Conceptual ramework

2tatement of the !roblem J

-ypothesis K

2ignificance of the 2tudy K

2cope and Delimitation ;

Definition of 'erms ;;

II REVIEW OF RELATED LITERATURE AND STUDIES

Local Literature ;

oreign Literatures ;K

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Local 2tudies 9

oreign 2tudies 9<

Rele&ance to the !resent 2tudy 9>

III METHOD AND PROCEDURE

Research Design ;

2ample and 2ampling 'echniue ;

Research 3nstrument and 'echniue 9

Data 0athering !rocedure

2tatistical 'reatment of Data =

IV PRESENTATION, ANALYSIS AND INTERPRETATION K

OF DATA

V SUMMARY OF FINDINGS, CONCLUSION AND

RECOMMENDATION

2ummary of indings J

Conclusion J<

Recommendation J>

REFERENCES K

APPENDICES KJ

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LIST OF TABLES

TABLE PAGE

; "onitoring 2ystem to *e 4sed 'o "easure $dherence

=

9 2tatistical "ethods to *e 4sed to 6now the Difference between

Consignment !ractices When the *ookstores are grouped$ccording to actors $ffecting it.

reuency and !ercentage Distribution of the Respondents@ !rofile

$ccording to 5ears of +peration

Le&el of $dherence on the !rescribed Deli&ery of 0oods !ractices

of 4ni&ersity *ookstores

= Le&el of $dherence on the !rescribed Risk of Loss, Damages and

Confusions !ractices of 4ni&ersity *ookstores

< Le&el of $dherence on the !rescribed %fforts to 2ell !ractices of

4ni&ersity *ookstores

J Le&el of $dherence on the !rescribed 2ales, !ayment andCommission !ractices of 4ni&ersity *ookstores

K Le&el of $dherence on the !rescribed Return of !roducts !racticesof 4ni&ersity *ookstores

> Le&el of $dherence on the !rescribed 'ermination !ractices of


; Le&el of $dherence on the !rescribed Legal items !ractices of


<

K

>

9

<

J

>

=;

=

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;; Differences in the Le&el of $dherence on the !rescribed Deli&ery of

0oods !ractices when 0rouped $ccording to 5ears of +peration

;9 Differences in the Le&el of $dherence on the !rescribed Risk ofLoss, Damages and Confusions !ractices when 0rouped $ccording

to 5ears of +peration

; Differences in the Le&el of $dherence on the !rescribed %fforts to

2ell !ractices when 0rouped $ccording to 5ears of +peration

; Differences in the Le&el of $dherence on the !rescribed !ayment,

2ales and Commission !ractices when 0rouped $ccording to 5earsof +peration

;= Differences in the Le&el of $dherence on the !rescribed Return of!roducts !ractices when 0rouped $ccording to 5ears of +peration

;< Differences in the Le&el of $dherence on the !rescribed'ermination !ractices when 0rouped $ccording to 5ears of

+peration

;J Differences in the Le&el of $dherence on the !rescribed Legal items

!ractices when 0rouped $ccording to 5ears of +peration

;K Differences in the Le&el of $dherence on the !rescribedConsignment !ractices when 0rouped $ccording to 5ears of

+peration

LIST OF FIGURES

FIGURES PAGE

; 'he Research !aradigm +f 'he Research <

9 Data 0athering !rocedure !rocess low Diagram

LIST OF APPENDICES

APPENDIX PAGE

$ Recommendations and 2uggestions of the !anel "embers KJ

=<

=>

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* "ethods K>

C 2tatistical $nalyses ;<

D Communication Letters ;

% Certifications ;

0antt chart and Line 3tem *udget ;=

0 !hotographic Documentations ;K

- Curriculum (itae ;

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CHAPTER I

The Proble !"# I$% B!&'(ro)"#

I"$ro#)&$*o"

3n a market where certain businesses must aim bigger sales, it is essential for them to

reach a wider hori#on for their products to be sold producti&ely. 3t is when consignment

arrangements take place. $ccording to "erriam8Webster Dictionary, consignment means the act

or process of sending goods to a person or place to be sold. 3n another plausible definition,

consignment means act of gi&ing o&er to another person or agents charge, custody or care any

material or goods but retaining legal ownership until the material or goods are sold. 'hat may be

done for the purpose of shipping the goods, transferring the goods to auction or intending the

goods to be placed on sale in a store. 3t is also &ery important to take note that consignment

relationship between the MconsignorM Adistributor of the goodsB and the MconsigneeM Arecei&er of

the goodsB is different from that of the seller8buyer relationship.

3n a realistic situation, seller transfers the ownership of the goods to the buyer, whereas

consignor transfers possession of the goods to the consignee for the purpose of selling them for

the consignor. 3n a simple note, meaning, the consignor still owns the goods. Contrary to the real

arrangements of consignment, if there is any case of doing acts not contemplated in the

consignment agreement and pocketing of the sales of consignment goods by the consignee, an

act of embe##lement has been therefore committed. 6nowing the real meaning of consignment,

consignment has also the standards to monitor the process of it. "any industries use this kind of

process including clothing, furniture, antiues, toy and e&en books. 3n fact, consignment is

properly obser&ed in the uni&ersity bookstores which employ consignment practices by selling

the books of the bookstore or publisher owning it.

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'his study about consignment aims to recount the processes taking place between the

consignor and consignee and also compare if theories supporting consignment accounting and

the real8world practices happening between the two parties are parallel or of the same le&el. 'his

also aims to discuss the entire process since this topic has been barely studied by all. 'his gi&es

the researchers more area to study its entirety in different perspecti&es using uni&ersity

bookstores which employ consignment as the sub?ect of the study.

B!&'(ro)"# o+ $he S$)#

Consignment is a topic in accounting that is barely tackled by the students which in

contrary, poses important notes needed to be ?otted down. 'he researchers want to ha&e a specific

study about the consignment topic and help other persons to raise awareness about the entire

system of consignment. 'he researchers also want to know more about their real accounting and

internal control practices of consignment practices and match it to the theory stating it.

$side from these reasons why there is a need to ha&e a study about consignment, there

are also issues that are needed to be addressed regarding some material misstatements, updates of

in&entories and of course the internal control issues of consignment.

'he researchers also intend to gather the data about the bookstores@ consignment

practices and compare and contrast them.

'he ob?ecti&es of the study are the following: A;B group the bookstores according toyears

of operation A9B determine the le&el of adherence on the prescribed consignment practices of

uni&ersity bookstores which employ consignment AB determine if there is a difference in the

consignment practices of uni&ersity bookstores which employ consignment when they are

grouped according to years of operation AB recommend or communicate gathered information

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about both industry a&erage and Nuni&ersity bookstore8specific@, and any relation between the

two and A=B identify topics for future research.

Theore$*&!l Fr!e-or'

$ consignment agreement is an agreement between a consignee and a consignor

for the storage, transfer, sale and resale of goods deli&ered AWikipedia, 9;=B. *usinesses choose

consignment arrangements for many reasons. 'hey may want to test marketplace demand for a

new product. 'hose stores can sell goods on consignment without in&esting initial capital in

purchasing them outright. $lthough a consignment arrangement maybe profitable for both

retailer and creator in the long run, it is essential that at the outset each party signs and maintains

paperwork sufficient to protect and satisfy its indi&idual interests. $ well8drafted consignment

agreement must pro&ide for some form of in&entory control and a clear allocation of the rights

and responsibilities of each party.

3ncorporated in the agreement items are the pro&ision instruction for each, but these are

general in nature. 'he need for a specific Aaccounting and internal controlB pro&ision is laid down

by Legal7oom A9;B an online legal technology department that pro&ides legal solutions in

&arious common categories including copyrights, D*$s, di&orce, business formation, trusts,

wills, name changes, patents, power of attorney, pre8nuptial agreements, real estate leases,

trademark registration the following are the items needed to customi#e and complete a

consignment agreement. 3t minimi#es agreement confusion, misunderstanding and error, and

clearly sets forth the parties@ expectations and fulfillment of obligations.

'aking a look at each item, related accounting and internal control practices to be

followed by the signing parties are laid down. 2ome of the items are combined into one, with one

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pro&ision as part of the whole, pertaining to internal control, and the other, accounting. -ere are

the specific pro&isions:

Del*.er o+ (oo#%/*efore, during, and after the deli&ery, the goods should be properly

administered. Detail specification Anumber coding, serial numbersB should be included in the face

of the goods. 'he initial list price should be deli&ered also to the consignee from the consignor,

together with the goods. +n the receipt of goods, the consignee should record a memorandum

entry. !ayment of freight should not be recorded in the consignee@s books.

R*%' o+ lo%% !"# #!!(e%/'he consignor bears both the cost of deli&ering the goods and the risk

of loss or damages occurring during the transport and custody is recorded by him. When the fault

is due to the consignee@s negligence, then the loss should be recorded in his books. 'he

consignee, while in possession of the goods, should establish policies and procedures on how to

pre&ent loss and damages by taking care of the goods with the Ndiligence of a good father of a

family@.

E++or$% $o %ell/'he consignee needs to promote the sale of the items consigned. !roper

positioning should be done to entice customer demand for the product. 'he consignee should

take into consideration how to increase the demand for the goods, either directly or indirectly.

$d&ertising expense should be properly recorded by the consignee.

P!e"$ !"# &o*%%*o"/*oth parties ha&e to agree on whether what percent of commission is

applicable to the following pro&isions. 'he commission should be properly recorded in the

consignee@s books together with those due to consignor. 2ince the commission is directly

associated with the sales, policies on impro&ing sales should be implemented. $mount collected

should be properly counted and deposited to the finance department. 'he payment period should

be taken into consideration.

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Re$)r" o+ 0ro#)&$%/ Return of products comes in two ways: in the part of the consignee and

consignor. 3n the part of the consignor as returnee, the consignor may compel the consignee for

the return of product. 'he consignee, on the other hand, may return pro&ided by reasonable

notice. 'he parties should agree on the period for return. $t the end of the term, it is automatic to

return unsold goods. 'he goods to be returned should be properly segregated before the return

date to pre&ent confusion. !olicies and procedures should be considered to safeguard assets to be

return to pre&ent additional loss and damages. $ memorandum entry should be recorded by the

consignee.

+n the part of the consignee as returnee, return of product should not be applicable. 1o return,

no exchange should be implemented. 3f the exchange is demandable according to circumstances,

the consignor is obliged to replace without the consignee@s expense. 2ince, deli&ery controls

should be taken into consideration, possible future return should already be eliminated.

Ter*"!$*o"/%ither party can end the agreement.'he consignee should disclose and properly

segregate those goods to be returned as a result of agreement termination, ?ust like the return of

the products. 'he only difference is that return of products is contingent, while that of

termination is determinable. 'he consignee should record a memorandum entry for the returned

goods caused by termination.

Le(!l *$e%/3t includes consignment period, notices, go&erning law and euitable relief,

consignor representation, and default. 'hese items might affect the accounting and internal

control practices of the consignee. *ut mostly, some items ha&e no applicable internal or

accounting control, with one of either, rather than both that was the initial consideration. 'hese

items were added to gi&e a more detailed test of the consignment practices accounting and

internal control of the consignee.

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'he research paradigm consists of the selected uni&ersity bookstore that employs

consignment and their le&el of adherence to the prescribed consignment practices by Legal

7oom@s consignment agreement. $ccounting and internal controls are both inherent in e&ery item

Adeli&ery of goods, risk of loss and damages, efforts to sell, payment and commission, return of

products, termination, legal itemsB listed abo&e. Consignment practices of campus bookstores

sampled will be compared to the prescribed consignment practices to measure the le&el of

adherence, and further recommend adherence. 'hose campus bookstores will be grouped

according to years of operation and any difference between the groups@ le&el of adherence will be

measured. "ost important is that the prescribed consignment practices mentioned abo&e take

into the form of the uestionnaire, de&ised by the researchers, which will be gi&en to the

uni&ersity bookstores.

S$!$ee"$ o+ $he Proble

Pre%&r*be# Co"%*("e"$ Pr!&$*&e%

• Deli&ery of goods

• Risk of loss, damages and

confusions• %fforts to sell

• !ayment, sales and

commission

• Return of products

• 'ermination

• Legal 3tems

Sele&$e# )"*.er%*$

boo'%$ore $h!$e0lo%

&o"%*("e"$

Figure 1.The research paradigm of the research.

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'he study aims to compare the consignment practicesof uni&ersity bookstores which

employ consignmentin 1ational Capital Region.

2pecifically, the following research ueries will be answered:

;. What is the profile of the bookstores in terms of:

;.;. 5ears of operationG

9. What is the le&el of adherence practices of uni&ersity bookstores which employ consignment

on the prescribed consignment practices, in terms of:

9.;. Deli&ery of goods

9.9 Risk of loss, damages and confusions

9. %fforts to sell

9. !ayment, sales and commission

9.= Return of products

9.< 'ermination and

9.JLegal itemsG

. 3s there a significant difference between the le&els of adherence of the uni&ersity bookstores

which employ consignment to the prescribed consignment practices when they are grouped

according to years of operationG

H0o$he%*%

*ased from the problem of the study, the research hypothesis will be formulated and

tested at the le&el of significance of .=:

H0o$he%*% I

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'here is no significant difference between the le&els of adherence of the selected

uni&ersity bookstores that employs consignment to the prescribed consignment practices when

they are grouped according to years of operation.

S*("*+*&!"&e o+ $he S$)#

'he significance of this study is for the stakeholders to be aware of the consignment

practices of uni&ersity bookstores which employ consignment in terms of accounting and internal

control. 'he following stakeholders are: accounting departments and bookstores of uni&ersities,

the uni&ersity itself, and their students distributor AconsignorB and future researchers related to

this topic. 'he benefit of gaining knowledge about the practice existing in our industry of

uni&ersity bookstores which employ consignment is to be compared and contrasted with the

theories researched and collected by the researchers.

For the university bookstores that employ consignment

'he result of this study is rele&ant to the uni&ersity bookstores to determine le&el of

policy needed to be implemented in terms of internal control. 3n addition, this helps the

bookstores look at the industry a&erage, and adapt or replicate the best practices to be

recommended by the researcher.

For the distributor

'he benefit of the bookstores as a consignor is to assess the uni&ersities they consigned.

'he assessment ser&es as a measurement of their decision whether to consign their books on a

certain uni&ersity or not.

For the Finance directorate/department

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'he result of this study gi&es rele&ance to the uni&ersities@ finance department to further

determine le&el of policy needed to be implemented in terms of accounting procedures. 3n

addition, this helps the bookstores look at the industry a&erage, and adapt or replicate the best

practices to be recommended by the researcher.

For the students of universities

2tudents will ha&e a background on the real world consignment business, as those written

on the books are theoretical only.

For the Future Researchers

'he delimitation of this study due to the incapability of the researchers can be conducted

by the future researchers. 'he title or topic of this study can be also replicated or adopted in the

future as it is related.

S&o0e !"# Del**$!$*o"%

4ni&ersity bookstores which employ consignment AaccountingB, as another part of the

criteria, are studied represented by its selected personnel pro&ided by the laid out criteria.

!ractices of uni&ersity, other educational institutions and independently8owned bookstores and

any difference of practices between the two Auni&ersity and othersB are not studied.

'hese bookstores should be located within 1CR areas. *ookstores Auni&ersity bookstores

which employ consignmentB located outside are not studied and any difference of practices

between the two A1CR and outsideB as well.

'he paper focuses on the consignee party of consignment accounting. !ractices of

consignors Adistributors andOor publishersB and any difference of practices between the two

Aconsignor and consigneeB are not co&ered.

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consignments, rather by direct purchase. Con&ersely, consignment does not end inside the

bookstore premises only, rather also within the mother sectionOdepartment with the bookstore as

its extension. $ccounting procedures are done by the materials management sectionOdepartment,

while internal control should be followed by the bookstore operations, as created by the former.

Consignee

3n a contract of carriage, the consignee is the entity who is financially responsible Athe

buyerB for the receipt of a shipment. 0enerally, but not always, the consignee is the same as the

recei&er.

3f the distributor dispatches an item to the bookstore &ia a deli&ery ser&ice, the distributor

is the consignor, the bookstore is the consignee, and the deli&erer is the carrier.

3n this particular study, the consignee is the uni&ersity8based bookstore

Consignor

'he consignor, in a contract of carriage, is the person sending a shipment to be deli&ered

whether by land, sea or air. 2ome carriers, such as national postal entities, use the term

MdistributorM or MshipperM but in the e&ent of a legal dispute the proper and technical term

MconsignorM will generally be used.

3f distributor sends a widget to bookstore &ia a deli&ery ser&ice, distributor is the

consignor and bookstore is the consignee. 3n this study, the book distributors are the consignors.

Accounting Practices

'hese are methods and procedures which an organi#ations management institutes

toA;B safeguard assets, A9B authori#e transactions, AB monitor disbursements, and AB ensure

the accuracy and &alidity of accounting records.

Internal Control

https://en.wikipedia.org/wiki/Contract_of_carriagehttps://en.wikipedia.org/wiki/Shipmenthttps://en.wikipedia.org/wiki/Shipmenthttps://en.wikipedia.org/wiki/Contract_of_carriagehttps://en.wikipedia.org/wiki/Consigneehttp://www.businessdictionary.com/definition/method.htmlhttp://www.businessdictionary.com/definition/procedure.htmlhttp://www.businessdictionary.com/definition/procedure.htmlhttp://www.businessdictionary.com/definition/organization.htmlhttp://www.businessdictionary.com/definition/management.htmlhttp://www.businessdictionary.com/definition/management.htmlhttp://www.businessdictionary.com/definition/safeguard.htmlhttp://www.businessdictionary.com/definition/safeguard.htmlhttp://www.businessdictionary.com/definition/asset.htmlhttp://www.businessdictionary.com/definition/transaction.htmlhttp://www.businessdictionary.com/definition/monitor.htmlhttp://www.businessdictionary.com/definition/monitor.htmlhttp://www.businessdictionary.com/definition/disbursement.htmlhttp://www.businessdictionary.com/definition/disbursement.htmlhttp://www.businessdictionary.com/definition/accuracy.htmlhttp://www.businessdictionary.com/definition/accuracy.htmlhttp://www.businessdictionary.com/definition/validity.htmlhttp://www.businessdictionary.com/definition/validity.htmlhttp://www.businessdictionary.com/definition/accounting-records.htmlhttp://www.businessdictionary.com/definition/accounting-records.htmlhttps://en.wikipedia.org/wiki/Shipmenthttps://en.wikipedia.org/wiki/Contract_of_carriagehttps://en.wikipedia.org/wiki/Consigneehttp://www.businessdictionary.com/definition/method.htmlhttp://www.businessdictionary.com/definition/procedure.htmlhttp://www.businessdictionary.com/definition/organization.htmlhttp://www.businessdictionary.com/definition/management.htmlhttp://www.businessdictionary.com/definition/safeguard.htmlhttp://www.businessdictionary.com/definition/asset.htmlhttp://www.businessdictionary.com/definition/transaction.htmlhttp://www.businessdictionary.com/definition/monitor.htmlhttp://www.businessdictionary.com/definition/disbursement.htmlhttp://www.businessdictionary.com/definition/accuracy.htmlhttp://www.businessdictionary.com/definition/validity.htmlhttp://www.businessdictionary.com/definition/accounting-records.htmlhttps://en.wikipedia.org/wiki/Contract_of_carriage

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3nternal control, as defined in accounting and auditing, is a process for assuring

achie&ement of an organi#ations ob?ecti&es in operational effecti&eness and efficiency, reliable

financial reporting, and compliance with laws, regulations and policies. $ broad concept, internal

control in&ol&es e&erything that controls risks to an organi#ation.

3t is a means by which an organi#ations resources are directed, monitored, and measured.

3t plays an important role in detecting and pre&enting fraud and protecting the organi#ations

resources, both physical Ae.g., machinery and propertyB and intangible Ae.g., reputation or

intellectual property such as trademarksB.

University bookstores which employ consignment

'hese are bookstores that are controlled and owned by the uni&ersities which, in actual

practice, employ consignment in their operations.4ni&ersity bookstores across 1CR regionare

inter&iewed if they manage a bookstore that sells books among students. 3t is an extension of the

uni&ersity@s finance departmentOdirectorate.

evel of Adherence

3n this research study, le&el of adherence is le&el of obser&ance and implementation of

uni&ersity bookstores that employ consignment, to what is the theoretical and ?udicial

background of consignment, thus prescribed. 'his is measured through the pointing system. $

higher score means higher le&el of adherence, while a lower, &ice8&ersa.

https://en.wikipedia.org/wiki/Accountancyhttps://en.wikipedia.org/wiki/Audithttps://en.wikipedia.org/wiki/Effectivenesshttps://en.wikipedia.org/wiki/Operational_efficiencyhttps://en.wikipedia.org/wiki/Fraudhttps://en.wikipedia.org/wiki/Fraudhttps://en.wikipedia.org/wiki/Accountancyhttps://en.wikipedia.org/wiki/Audithttps://en.wikipedia.org/wiki/Effectivenesshttps://en.wikipedia.org/wiki/Operational_efficiencyhttps://en.wikipedia.org/wiki/Fraud

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CHAPTER II

Re.*e- o+ Rel!$e# L*$er!$)re !"# S$)#*e%

Lo&!l L*$er!$)re

$ccording to (alixQ !eralta A9;B, a consignment is a method of marketing goods in which

the owner called the consignor transfers physical possession of certain goods to an agent called

the consignee who sells them on the owner@s behalf. Consigned goods shall be included in the

consignor@s in&entory and excluded from the consignee@s in&entory. When consigned goods are

sold by the consignee, a report is made to the consignor together with a cash remittance for the

amount of sales minus commission and other expenses chargeable to the consignor.

$ccording to D+- A9;=B, they ha&e defined consignment as the arrangement where the

following reuirements are present: A;B Deli&ery of goods by the owner AconsignorB without sale,

to a go&ernment agency AconsigneeB A9B Consignee must try to sell the goods and remit the price

of the sold goods to the consignor. AB Consignee accepts without any liability except failure to

reasonably protect them from damage. AB $t terms not disad&antageous to the go&ernment.

$ccess to pharmaceuticals is affected by different factors such as the prices of medicines,

economic capacities, presence of healthcare pro&iders, a&ailability of health related infrastructure

Ae.g. drug outlets, clinics, and hospitalsB regulatory en&ironment and cultural processes to the

go&ernment in order to impro&e health outcomes and foster national de&elopment. 3n order to

bridge the gap between the mandate to deli&er basic health ser&ices to the public and the

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inadeuacy of resources, the Department of -ealth AD+-B, has designed a drug consignment

schemes for the purpose of adhering to the basic principles of transparency and competiti&eness.

3n the article 2elling strategy for newbies: consign your product by 'he !hilippine +nline

Chronicles A9;;B, consigning means letting others sell for you. 3n this kind of arrangement,

goods change hands but money does not P at least not yet. 5ou consign your product when you

deli&er it Aor it is picked upB by another business, usually a retailer or &endor, with the

understanding that you will get paid only after it has been sold. 3n a manner of speaking, you are

lending your products to a &endor usually a retail store owner who typically displays your

wares and includes them in his product lines. 3f the merchandise sells, he pays you the agreed

percentage and other costs. 'he arrangement is ad&antageous to both consigner you and the

consignee the &endor or retailer. Consignment pro&ides you with a sales outlet for your

products, minus the rental costs, maintenance expenses, utilities, labor and countless other

expenses that you would ha&e incurred if you had your own store. +n the other hand, retailers

and &endors welcome consigned goods as this allows them to stock up on products without tying

up their money in in&entory uncertain to be sold. +ffered e&en an unknown product or brand on

consignment, a retailer would tell himself: F3 ha&e nothing to lose.H 3t is not of course the most

ideal situation for you as producer. 5ou must ha&e enough cash on hand as you wait for your

goods to be sold at your consignee@s outlets. 3n the end, you may find yourself swamped with

piles of unsold, returned, possibly spoiled merchandise. With no money in&ested, your

consignees may not ha&e felt obligated to push your products. -owe&er, consignment has ser&ed

the purpose of many micro and small entrepreneurs.

$ccording to 'an A9;B, one of the methods on distributing the books in the !hilippines

is the consignment method. 3ts different from simply selling the books to the bookstore because

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get in the good graces of the big bookstore chains and if youre smart, youll use them. *ut the

fact of the matter is, I off the suggested retail price at best is still I off the retail price. $s a

publisher, youll ha&e to accept that around half of what consumers pay wont go to your pockets

but to the bookstore. -a&ing established how much profit a bookstore acuires from consigned

books, you can estimate how much discount a publisher will gi&e the bookstore if the latter buys

their books. 'hats anywhere from an additional ;I to 9I. 2o assuming you got a good deal

with the bookstore and youre consigning books to them at I, if you want them to buy the

books, youll ha&e to sell at around

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period of six months, or the reference price should make use of the pre&ailing price of the

Western (isayas "edical Center andOor the can&ass price made by the 'echnical 2upport 2er&ice

Di&ision of the Consignment "anagement *oard within the same period. 3n cases of

consignments for !hil-ealth beneficiaries, the selling price of the items should not be higher

than the pre&ailing price of the same items in local pri&ate pharmacies and outlets. 3ncome

generated sales of the consigned items should be used for the payment of dispenses or utili#ed

consigned items after the appropriate in&entory is conducted. 3n addition, re&enue generated

from the program should be deposited directly to the hospital general fund. or uality

assurance, the consignments items may be sub?ected to random sampling, inspection and testing

by the consignee and other appropriate support agencies. 'he consignment system is a method of

assuring the a&ailability of stocks wherein the consignor entrusts its goods to the pro&incial and

district hospitals pharmacy or other participating di&ision and offices of the consignees for sale.

'he consignor shall be paid only for the actual uantity consumed using the money generated

from the sale of the consigned goods within the agreed period of time.

Fore*(" L*$er!$)re%

'he sales acti&ity of any business can be organi#ed in different ways. With the customers

spread all o&er, the business entity cannot afford to ha&e only minimum selling points nor can it

ha&e its own resources to ha&e the outlets all o&er. 'he business &olumes cannot be limited in

any case. 'he core competence of a manufacturing company is to produce a good uality

product. 3t creates a network of its own outlets, dealers, commission agents, institutions etc. to

distribute its products efficiently and effecti&ely. 'hus the selling may be handled directly

through own salesmen or indirectly through agents. 3n case of direct selling, the company usually

has depots all o&er. 'he stocks are transferred to these depots and from their finally sold to

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ultimate customers. 'his in&ol&es huge expenses and problems of maintaining the same on a

permanent basis. -ence, the firm could appoint agents to whom stocks will be gi&en. 'hese

agents distribute the products to ultimate customers and recei&e commission from the

manufacturer. +ne such way of indirect selling is selling through consignment agents. 'he

relationship between consignor and consignee is that of !rincipal8$gent relationship.

Consignment takes place where goods are transferred from the owner AconsignorB to an agent

AconsigneeB for the purpose of sale by the consignee on behalf of the consignor. 3t is important to

understand that the relationship of principal AconsignorB and agent AconsigneeB exists. *ecause of

this agency relationship, ownership of the goods does not transfer to the consignee. 'he

consignee, as the selling agent, is entitles to a commission for selling the goods expenses may be

incurred by both parties and periodically or on completion of the consignment, settlement is

effected between the parties. 3f any goods remain unsold then they are generally returned to the

consignor. Consignment is a fairly common commercial transaction, perhaps more common than

many people may think. A$?anthan, 9;B

$s cited by 6aynak and 2eyoum A9;B, Consignment 2ales is defined as a method in

which the exporter sends the product to an importer on a deferred payment basis that is the

importer does not pay for the merchandise until it is sold to a third party. 'itle to merchandise

passes to importer only when the payment is made to the exporter. Consignment is rarely used

between unrelated parties, for example, independent importers and exporters A0oldsmith, ;>K>B.

3t is best used in cases in&ol&ing an increasing demand for a product for which a proportioned

stock is reuired to meet such need A'yler, ;>>B. 3t is also used when a seller wants to test8

market new products or to test the market in a new country.

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$ccording to *onomo A9;B in theory, a consignment in&entory management program

works best at the manufacturing le&el when implemented as a &endor managed strategy. *y

de&eloping a collaborati&e relationship with parts supplier can determine which items should be

placed on a consignment plan. Consumable in&entory works best, namely the components,

fasteners, and packaging materials constantly used to accomplish your production. With

consignment in&entory management programs, an agreement is established, which outlines each

party@s liability obligations, the part prices, and stocking amounts. 4sing enhanced

communication and software connections that match existing purchasing systems, supplier

transfers in&entory shipments to your facility yet retains ownership of those parts until they are

consumed on the assembly line. *ar code scanners and other tools keep accurate data on

consumption le&els, allowing supplier to orchestrate replenishment shipments efficiently, issue

purchase orders on a pre8arranged schedule, and effecti&ely manage his own stock le&els to keep

facility adeuately supplied. 3mplementing a consignment in&entory management program at

manufacturing facility offers numerous cost sa&ing ad&antages, and should be &iewed as a &alue

added ser&ice, the benefits of which continually compound o&er time. 3n addition to optimi#ing

cash flow with an immediate infusion of capital, this in&entory strategy offers operational

impro&ements by decreasing production times, labor costs, and administrati&e expenses.

Consignment in&entory management eliminates line down occurrences caused from stock out

situations, gi&ing the reliance to depend on those items always being a&ailable for usage, and

arrange production schedules accordingly. 3t also allows to respond uickly to changes your own

customer@s reuests, pro&iding a le&el of ser&ice that competitors cannot. *ecause of the

increased communication between company and supplier, the labor in&ol&ed in recei&able

inspections is significantly reduced. "oreo&er, the soft costs inherent in handling and carrying

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stock is remo&ed, re?u&enating profit margins. (endor managed in&entory programs that include

a consignment in&entory management strategy offer manufacturers a myriad of progressi&e

operational ad&antages, streamlining production times, while simultaneously reducing the

tedious administrati&e tasks and inspection processes that consume &aluable resources.

$ccording to Rettger A9;B at the heart of the Chelsea 0reen consignment contract is an

agreement between the bookseller and the publisher on the program@s goals: Fto increase sell8

through of titles, allow booksellers to pay for books as they are sold, and further minimi#e

returns.H *ooksellers must order enough Chelsea 0reen titles to fill a dedicated space and agree

to keep titles prominently displayed within their regular categories. *ased on monthly sales

reports from the bookstore, consignment in&oices are generated and must be paid by the ;=th of

the month. Chelsea 0reen@s minimum consignment order is fi&e books, any combination of

titles the discount is = percent plus free freight. 'itles that show little or no mo&ement after an

agreed8upon time become candidates for shared markdowns. $t the end of the initial

consignment agreement, which is for a six8month trial, the bookstore and Chelsea 0reen re&iew

and e&aluate the program. 3n the recent experiments in consignment, $*$ C%+ +ren 'eicher

said, FWe think it@s extremely encouraging that publishers are taking a fresh look at trade

practices and asking themsel&es whether there are potentially profitable new ideas to be

explored. 3n our discussions with publishers, $*$ has encouraged them to examine such new

a&enues as consignment, which we belie&e ha&e the strong potential of selling more books, a

definite win8win for publishers and booksellers.H 'he consignment model Fis going to become

&ery common &ery uickly,H said Chartrand, who is in talks with other publishers about

establishing similar partnerships. F3t addresses such an important, fundamental issue for

independent booksellers, which is cash flow. 3 am ha&ing discussions with two other publishers

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to implement consignment deals,H said "orrow. F3 hope to ha&e half a do#en partnerships

worked out by next year. 3t is time for the industry as a whole to gi&e consignment a fresh look.H

3n the Writer@s Weekly, -oy A9;;B said that an increasingly popular scenario is when a

bookstore buys the books on consignment. 4nder consignment, the bookstore doesn@t pay for the

books untilOunless they sell. *ookstores literally ha&e nothing to lose Athey don@t e&en ha&e to

pay anything up frontB and authors are getting their books into local stores. "any of these

authors get their books stocked on the Flocal authorH shel&es at their neighborhood bookstores

and can e&en get their books on the front counter, depending on how well they promote

themsel&es to the store@s owner or manager. +f course, consignment works for many different

types of retailers, not ?ust bookstores. 2ome authors simply stop in once a month, check to see

how many books are left on display, and in&oice the store for the books that ha&e sold. +ther

authors are kept abreast of sales by the store manager, and recei&e checks on a regular basis. +f

course, this would only happen with a &ery small store. 'he large stores ha&e too much red tape

in their accounting departments for the store manager or a clerk to track sales of specific items.

'he downside of a consignment contract is books can get damaged by customers thumbing

through them, and are sometimes damaged to the point where they are unsellable. 2o, if the

author must collect unsold books at some point to sell elsewhere, they may not be fit to sell.

+ccasionally, an author gets stiffed by a store on a consignment deal so the recommendation is

by only dropping off a handful of books, not an entire case. +ffering a consignment deal to the

store will probably gi&e the best chance of ha&ing carry it. 2imply offer to sell it on a

consignment basis, and check in e&ery month or two to see if any ha&e sold. *ill them for any

copies that are no longer on the shelf. 'he appeal to a store owner or manager is that they need to

take almost no action, and spend no up8front money, to get the books on their shelf. 'he easier

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this transaction is for them, the better chance of the books being stocked by the store. When

deli&ering the books, two copies of a consignment agreement must be brought. 'he agreement

should contain a clause that specifies the bookstore will pay you for all copies that no longer

appear on their shelf. +therwise, they could claim copies were FstolenH, and not pay for those.

'hey could also claim copies were Fdamaged and discardedH, and try to not pay for those.

$nything that happens in that store to your books is not, and should not, be the suppliers

responsibility.

Lo&!l S$)#*e%

3n the study of )a&ier et. al A9;B, in a duopolistic market where goods are consigned

under a (endor "anaged 3n&entory setting, the two manufacturers engage in a price competition

to capture the larger percentage of the market. 2ince they are able to dictate the market price of

their goods, the retailer is not in any way able to change the prices set by the respecti&e suppliers.

When this happens, the retailer acts as a mere selling space of goods and point of competition

among suppliers. 'he intensity of competition is in&estigated where price competition with the

consideration of brand substitution is analy#ed with respect to the decisions that are made by

each manufacturer. 3n considering the possible action and reaction scenarios that could take place

across different in&entory cycles, significant factor interactions are identified and analy#ed as to

how it affects mean profit and pricing and reorder decisions a&ailable to the manufacturer. $s

manufacturer make discounting decisions in terms of price and time of discount, and reorder

point uantities across time, the optimal decisions as well as its seuence of implementation can

be &iewed as seuential decision process that can be modeled as a Dynamic !rogramming

model. Competiti&e measures as well as e&entual counteractions by competitors were simulated,

similar to how other studies considered action8and8reaction of players in the competition.

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3n another study of 2al&ador et. al A9;B, their study@s results re&ealed that the existing

accounting systems of their selected school for cash receipts and disbursements, recei&able, and

re&enues were all unsatisfactory while the debts and expenditures needed impro&ement. 'he

internal control system installed on accounting system for cash receipts and disbursement and

debt also needed impro&ement. 'he internal control for re&enue was outstanding and

unsatisfactory for expenditure. 'he existing system for cash managements on its cash receipts

and disbursements both needed impro&ement while in the recei&able petty cash fund, debts, and

expenditure were all unsatisfactory. 'he existing system for re&enue was satisfactory. 'he

internal control system particularly on cash receipts, recei&able, debts, re&enue, and expenditures

needed impro&ement. 'he internal control for cash disbursements and petty cash fund were both

unsatisfactory. 'he existing system for management on its cash receipts, cash disbursements,

recei&able, debt, re&enue and expenditure were assessed to be the strength in the current existing

practices on fund and re&enue management of the school. 'he internal controls system installed

on fund and re&enue management system particularly on cash receipts, disbursement, petty cash

fund, recei&able, debt, re&enue, and expenditure were also considered as the strength of the

institutions current controls practices on fund and re&enue management systems. 3n addition, the

following were found to be the adoptable practices of related school to enhance the current

system about und and Re&enue "anagement 2ystem: imprest system for cash receipts and

disbursement concentration banking to fasten the collection scheme the credit function of the

institution separated from the re&enue function establishment of adeuate allowance for

probable losses from delinuent accounts write8off of delinuent accounts thru appro&al by the

*oard of 'rustees procedures of probable future collection from written off accounts pre8

numbered documents used for billing written procedures regarding the recording and

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reconciliation of re&enue generating transactions procedures to ensure that fees billed are

adeuate to reco&er all direct and indirect costs the person responsible to the accountOnotes

recei&able is independent from the credit manager preparation of cash budget that begins at least

six months before the beginning of the next fiscalOcalendar year preparation of the budget that

in&ol&ed all the indi&iduals affiliated with the institution paid in&oices that are stamped F!$3DH

to pre&ent the duplicate payment.

3n another study of $bacahinet. al A9;9B, they ha&e researched about the %dmar "arketing

which is currently does its sales and in&entory manually. $s such, it takes time to locate certain

files for reports and the entries in the monitoring sheet are not clear, thus, creating confusion.

'he pro?ect is an automated 2ales and 3n&entory 2ystem which has an array of functions

in&ol&ing sales and in&entory that can be of &ery big help to the company. 3t aims to make files

updated and easy to locate, hence, data and information become accurate and orderly which may

pro&ide a faster alternati&e or means in doing the in&entory. 'he system in&entory may also be

harder to cheat because the coming in and going out of stocks are recorded in the system. 'he

warehouse personnel is more accurate in their reports and can sa&e more time by using the

system. 2ince the system user has sa&ed time, the personnel in8charge can then be more

producti&e in terms of output which can be beneficial to the company.

Di&a and 'rinidad A9;;B conducted a study to enhance the existing pharmacy in&entory

control system of "ali?an Diabetes Center A"DCB to ha&e a better in&entory management and to

reduce risks of errors and fraud. 3t sought to identify the enhancement and design that "DC

could adopt for a more effecti&e and efficient in&entory system. 2pecifically, the study aimed to

determine the current policies and procedures of "DC to account for their pharmacy in&entory

&erify strengths and weaknesses of the current in&entory control system, pro&ide appropriate

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measures to be adopted to minimi#e risks from the weaknesses and threats and identify

in&entory management and accounting concepts, principles, and techniues that should be

applied to the enhanced in&entory control system. 'he study used descripti&e research design.

3nter&iew with employees was conducted and internal control uestionnaire was gi&en to the

clients to gather the needed data. inally, obser&ations, walkthrough, and nonparticipant were

conducted to &erify the results of the inter&iew and uestionnaire. Results re&ealed weaknesses

of the current system through 2W+' analysis. 'herefore, the study proposed different methods

from accounting and management concepts to reduce the threats from these weaknesses. 'he

analysis was suggested as a method of classifying the in&entory of the pharmacy. "oreo&er, the

perpetual in&entory system was suggested to a&oid expensi&e periodic in&entory counts.

urthermore, the use of different accounting forms like !urchase "anagement, !urchase +rder,

and Recei&ing Report as well as close super&ision were recommended to reduce the weaknesses

found in the pharmacy@s current in&entory system.

3n the study of !ica#o A9;9B, unlike *otikang *arangay which are supplied solely by

!hilippine 3nternational 'rading Corporation, and must pay for e&ery deli&ery they recei&e. 'he

0enerics !harmacy does consignment for each franchisees, which can also get medicines from

other sources. 4nder consignment, the supplier AconsignorB pro&ides an in&entory of drugs to a

retailer which pays only the items that is able to sell. 'his is an important distinction between

*1*s and or8profit franchisees which confers on the latter a distinct ad&antage. 'he 0enerics

!harmacy also tends to ad&ertise more, thus attracting more customers.

Fore*(" S$)#*e%

Siu A9;;B studied that many researchers ha&e recently gi&en considerable attention to

coordinating the issue between suppliers and retailers in the supply chain. -owe&er, most

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researchers assume that the chain@s market demand is either price sensiti&e or constant.

Conseuently, this work considers coordinating a single supplier8single retailer distribution

system. Consignment in&entory is a mechanism of supply chain management. $dopting

consignment arrangement companies can dramatically lower company costs and drop prices to

increase demand for products, attract new customers and e&en enter new markets. $ consignment

arrangement makes no payments to the retailer until the item is sold therefore the retailer has no

money tied up in in&entory and bears no risk associated with demand uncertainty. 'he supplier

possesses market condition information directly, mitigating bullwhip effect in the supply chain.

'his increases firm@s measurement accuracy of the retailers@ selling efforts, reducing demand

uncertainty, and enabling the supplier to better match supply with demand.

3n the study of -an A9;B, consignment stores are, Flocations where consigners gi&e

their gently used itemsPless than three years and in good conditionsP, and other parties

purchase those consigned items. 3f the items are sold within > days, some percentage of sales

profits are taken by the store, and the rest of money go to consigners. 3f the items are not sold

during the period, items are returned to consigners or marked down.H $s defined here,

consignment applies two types of peoplePconsigners and customers. Consignment store owners

not only make efforts to maintain good relationships with customers, they also maintain

relationships with consigners. 'hey are both important, since consigners are people who bring

uality items, and customers are people who purchase these items, and finally produce profits.

'he store deals with items that ha&e brand uality, wearable, in good condition, and less than 98

years old. $lthough consignment store owners ha&e also the freedom to choose their items like

&intage store owners, sometimes their choices are limited to only what consigners bring to the

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store. 'hey also pro&ide uality ser&ices to community, consigners, and customers, offering

entertainment and esthetic experiences.

3n another study of Ramrakhyani A9;B 2upplier, *uyer and Retailer are the three most

important aspect of a 2upply Chain with in&entory as the common link connecting the three.

2ince the ad&ent of 2upply Chain "anagement 2ystem, researchers are in&ol&ed eradicating the

problems incurred in the smooth functioning of the supply chain system and are exploring ways

to increase the o&erall profitability of the system. ("3 A(endor "anaged 3n&entoryB 2ystem with

C3 AConsignment 3n&entoryB offers a solution for many manufacturing businesses. 3n this

research work the focus is made on both the type of in&entory management agreement systems.

'o gather information an empirical study was done at "aruardt 2witches 3nc. and inter&iews

were conducted with the !roduction and 2upply Chain %ngineers. %xtended Literature re&iew

was done to know the latest updates in the field of study. 'his research was more focused on

studying different 3n&entory 2upply Chain "odels and compares the profit function of 2upplier

and *uyer working in a ("38C3 en&ironment and to show the profitability of the o&erall 2upply

Chain "anagement 2ystem in a "anufacturing 3ndustry. "ore work was carried out to extend

the study done on M2upply Chain "odel of (endor "anaged 3n&entoryM TDong and Su, 99U by

incorporating the mathematical model with the benefits associated with !ayment Delays and

'ime (alue of "oney in the ("3 2ystem.

$s cited in the study of 0ilde A9;B, another use of the ("3 is to include consignment

in&entory policy. 'here has o&er the past decades been an increasing amount of researcher that

has started to concern the importance related to profitable &ertical relationships between seller

and buyer. rom before and little back in time company@s where working in short terms

perspecti&e if we compared it with the normality of today. 'he most important factor was price

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and how there was possible to reduce the price on articles to get the cost down. 'oday there are

more focus towards strong integration, collaboration and information sharing between both

parties to make profit, and be able to reduce cost so e&erybody gain profit, and also leaning

towards strong relationship with fewer and more strategic suppliers. A(alentini and 7a&anella

9B Consignment stock will in this case assume it will work under the assumption that the

&endor will increase the ser&ice le&el on the warehouse for seller according to an optimal ser&ice

le&el and to reduce the probability of a Fstock8outH situation. Recent studies show that there can

be a lot of ad&antages of using ("3 with consignment stock policy, so there are made a list of

ad&antages and disad&antages considering the ;J possible implementation of ("3 policy with

C2, trying to highlight some important factors to be aware of.

$ccording to the study of (erhei?en A9;B in general, the central idea is that total

channel costs for (endor "anaged 3n&entory8consignment in a supply chain channel between a

buyer and &endor decrease o&er both the short and long term, but such a decrease may fall short

of the centrally coordinated supply chain ADong and Su, 99B. 3n the Dong and Su study, ("38

consignment arrangement is compared to a base case in which the buyer dominates and

determines the order uantities and a proposed transfer price according to local profit

maximi#ation. 'he benefits of ("3 increase with increasing difference between the &endor@s and

the buyer@s setup costs for a transaction Pand thus their preferred order8si#es. %&idently,

implementation of ("3 with consignment is always beneficial to the buyer as the in&entory

holding costs are absorbed by the &endor. -owe&er, when the transaction setup costs for the

buyer and &endor are of the same magnitude, it is possible that implementation of ("38

consignment leads to a decrease of the &endor@s profits in the short term. 3n the long8term,

howe&er, reduction in o&erall supply chain channel costs results in a competiti&e edge, leading to

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increasing sales &olumes, so the &endor@s profits could increase. $ special assumption in the

Dong and Su study is that the production costs increase con&exly in uantity. 1ote that other

efficiency gains attributed to ("3 Psuch as impro&ed coordination and forecasting, leading to

reduced safety stocks and @more degrees of freedom@ for &endor to manufacture or deli&erP

ha&e not been taken into account in this study.

Rele.!"&e $o $he Pre%e"$ S$)#

'he head part of this chapter deeply explains the system of consignment which is also

known as indirect selling. 'he !rincipal8$gent Relationship or indirect selling definition and

how they function is shown thoroughly. Deferred basis of payment is effecti&e for this system

where the payment is dependent on the third party as commission will be gi&en to the consignee.

3n a bookstore and publisher relationship where the bookstore is the consignee and the publisher

is the consignor. urthermore, it is said that consignment system is the best for meeting the

increasing demand by the market for the benefit of the in&ol&ing parties Asupplier, buyer, and

&endorB. $lso, it offers operational impro&ements such as cost sa&ing, decrease in labor costs,

production times, and administrati&e expenses as euated fir a higher profit. Consignment deals

work for many different types of retailers, not ?ust bookstores and it becomes so much common

&ery uickly. 'hese discussions are rele&ant to the study specifically in accounting relations and

internal controls. 'hus, the rules, agreements, and step8by8step system, and possible scenarios

between the two related parties are also stated. 'he $32 relations come in pace in settling bar

codes on a certain in&entory like books. 3t helps the consignment to be easier, systematic, and les

error8occurring.

'he chapter also discusses the risks may be encountered by the suppliers and retailers. 3t

is said that the scenario determine who will take a higher risks. +n the market, the risks include

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the price competition as it affects the mean profit, pricing, and reorder decisions for the

manufacturer.

CHAPTER III

Me$ho#% !"# Pro&e#)re%

Re%e!r&h De%*("

'he study made use of uantitati&e, descripti&e approach to in&estigate the adherence of

selected uni&ersity bookstores employing consignment. 3t wasuantitati&e since it wasconcerned

with the numbers and freuencies with which the adherence le&el of the bookstores to the

prescribedconsignment practicescan be measured. 'he response gi&en by the representati&es of

selected uni&ersity bookstores represented that of the population.

'he data obtained were used as information about the selected uni&ersity bookstores@

consignment practices. $s planned, one way of extending knowledge aboutuni&ersity bookstores

that employ consignment was to obser&e and e&aluate them. $t the end of the research, the

results were communicated to the management of the selected uni&ersity bookstores.

2ince sampling of the population was used, the results of the study were assumed as

describing the population of interest Aall uni&ersity bookstores that employ consignmentB.'he

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sample used was also assumed as representati&e bookstores of all bookstores around 1CR region

in terms of their consignment practices.

S!0le !"# S!0l*"( Te&h"*1)e

'he respondents of the study were the selected personnel of uni&ersity bookstores that

employ consignment as they are the ones o&erseeing the consignment practices. 'hey ha&e

enough knowledge for their being positioned in the organi#ational structure. 2elected uni&ersity

bookstores that employ consignment and their representati&es were assumed as one and only one

entity. "eaning, the opinions gi&en by the respondents reflected that of the uni&ersity

bookstores@ consignment practices.

'he population isall uni&ersity bookstores that employ consignment in the whole

!hilippines. With its wide scope, population was narrowed down using the following criteria, as

purposi&e sampling was used: A;B the uni&ersity should be located within 1CR area A9B the

student population must be at least ;, for the current school year and AB the personnel

should ha&e knowledge on both accounting and internal control of the uni&ersity

bookstore@sconsignment practices. 'he number of respondents would be dependent from the

number of uni&ersity bookstores who passed the criteria gi&en.

Re%e!r&h I"%$r)e"$ !"# Te&h"*1)e

2ince the study used descripti&e method, sur&ey type of research, uestionnaire was

utili#ed as a tool for gathering data. 'he uestionnaire is entitled Prescribed Consignment

Practices Questionnaire. 3t is an adapted uestionnaire using different standards and

pronouncements about consignment accounting and internal control.

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2tandards and pronouncements that were used as guides includes: 3nternational

$ccounting 2tandards 98 3n&entories, 3nternational $ccounting 2tandards ;K8Re&enue

Recognition, 6!"0 3nternal Control !ractical 0uide, C+2+ 3nternal ramework 0uide,

4ni&ersity of "uscogee *ookstore policies and !rocedures L*"$ ALondon *ullion "arket

$ssociationB Consignment $greement Draft, Legal7oom Consignment $greement and 0uide,

and $d&anced $ccounting 'wo by*aysa and Lupisan.

3n the context of the study, the researchers focused on determining the consignment

practices of uni&ersity bookstores that employ consignment. 'he tool consisted of eight parts

one for the demographics and se&en for the consignment practices with fi&e uestions for each

from a combination of accounting and internal control pro&isions. 'he distribution of uestion

for the two was distributi&e.

'he research problem as stated in the 2tatement of the !roblem of the paper was

answered systematically as to the design of the uestionnaire. 'he first part of the uestionnaire

represented the first specific problem, FWhat is the profile of uni&ersity bookstores in terms of

years of operationG@@ 'he second part of the uestionnaire represented the second specific

problem, FWhat is the le&el of adherence of uni&ersity bookstores on the prescribed consignment

practices: AaB deli&ery of goods AbB risk of loss, damages and confusions AcB efforts to sell AdB

payment, sales and commission AeB return of products AfB termination and AgB legal itemsGH 'he

third and fourth specific problems were not directly represented by the uestionnaire, but rather

answered using statistical methods.

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rom the population, all uni&ersity bookstores that employ consignment, selected

respondents were segregated using the criteria laid down. irst, all uni&ersities in 1CR were

contacted one8by8one. 'he following ueries were asked: A;B is there a bookstore inside the

campus, that is owned and operated by the uni&ersity, ?ust like an extension of the inance

department and A9B is the bookstore employing consignmentG rom these, those uni&ersities

ha&ing bookstores that employ consignment were segregated.

rom those segregated, the researchers contacted the selected uni&ersities@, through email

or phone call to send permission and reuest to disseminate enrollment information. $fter the

receipt of information, those ha&ing student population of at least ;, for the current year,

were further segregated.

rom those segregated, the researchers contact the selected uni&ersities@ finance, through

email or phone call to send permission and reuest to conduct study and choose a personnel as a

representati&e of the uni&ersity. 'hose personnel who ha&e enough knowledge about the

accounting and internal control practices of the consignment practices were segregated. 3t is the

head of the finance department that decides who will be selected. 2elected personnel will be the

respondent and representati&e of the uni&ersity.

'he sur&ey was adapted using standards and pronouncement for consignment accounting

procedures and internal control. 'he uestionnaire was composed of thirty8fi&e A=B uestions,

which were detailed and more related to accounting procedures and internal control for the

consignment practices.

(alidation of the uestionnaire and reliability test were done with the help of the ad&iser

and outside party &alidators, which are C!$s. $fter the &alidation process, the researchers sente8

mails to selecteduni&ersities@ finance department for permission to conduct study. 'his was due

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to the reason that the head of the finance department will be the one to choose the representati&e

of the uni&ersity needed for the study. +nce the feedback from the e8mail was accepted, with a

permission to deli&er the uestionnaires, the researchers distributed the uestionnaires to the

respecti&e uni&ersities@ offices. $nswering of the uestionnaire was supported by direct

obser&ation. %&ery time a uestionnaire was completed, tabulation of points was done. Results

obtained remained confidential to the researchers themsel&es. 'he next step did not start until all

the uestionnaires were retrie&ed.

1ext, statistical computations were made to test the hypothesis. "ean, standard

de&iation, and coefficient of &ariation were computed to determine the le&el of compliance of the

bookstores to the prescribed consignment practices. 6ruskal8Wallis - testwasutili#ed in

identifying significant difference between the responses when the respondents were grouped to

years of operation.

S$!$*%$*&!l Tre!$e"$ o+ D!$!

Results from the first part of the uestionnaire were tallied together in a freuency table

used to create charts. Results from the second part of the uestionnaire were tallied together by

dimension. or each statement item, the following were the pointing system:

Po*"$ De%&r*0$*o"

$dhere

9 $dhere with limitations

; 1ot adhere

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Table 1.Pointing system to be used to measure adherence

De%&r*0$*.e A"!l%*%

"ean, standard de&iation, and coefficient of &ariation werecomputed to determine the

consignment practices of each of the sample for e&ery dimension. rom thirty8fi&e A=B

uestions, mean was computed for e&ery dimension of consignment practices, and the result

ser&ed as adherence of the sample to the prescribed consignment practices. Ranking was done in

each dimension in able to see who among the uni&ersity bookstores has exemplary practices for

each dimension.$n o&erall mean was also computed for e&ery dimension.

2tandard de&iation and coefficient of &ariation were used to measure how each response

drastically changed from one to another which should not be high, in the sense that each

uestions were related to each other all reuiring the same degree of response.

I"+ere"$*!l S$!$*%$*&%

2tatistical computations were made to relate the results thereon. *elow is the list of

statistical methods that were used to compare consignment practices among bookstores when

they are grouped according to profile.

Ye!r% o+ o0er!$*o"Co"%*("e"$ 0r!&$*&e% S$!$*%$*&!l e$ho# )%e#

Deli&ery of goods 6ruskal8Wallis - test

Risk of loss, damages and 6ruskal8Wallis - test

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confusions

%fforts to sell 6ruskal8Wallis - test

!ayment, sales and

commission6ruskal8Wallis - test

Return of products 6ruskal8Wallis - test

'ermination 6ruskal8Wallis - test

Legal items 6ruskal8Wallis - test

Table 2. !tatistical methods to be used to "no the difference beteen consignment practices

hen the boo"stores are grouped according to factors affecting it.

Kr)%'!l2W!ll*% H Te%$

'he 6ruskal8Wallis - test Asometimes also called the Mone8way $1+($ on ranksMB is a

rank8based nonparametric test that can be used to determine if there are statistically significant

differences between two or more groups of an independent &ariable on a continuous or ordinal

dependent &ariable. 3t is considered the nonparametric alternati&e to the one8way $1+($, and

an extension of the "ann8Whitney 4 test to allow the comparison of more than two independent

groups. 3n the context of the study, years of operation were di&ided into four categories or

groups: ;8=,

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CHAPTER IV

Pre%e"$!$*o", A"!l%*% !"# I"$er0re$!$*o" o+ D!$!

3/ Pro+*le o+ $he Re%0o"#e"$%

3/3 Ye!r% o+ O0er!$*o"

'able illustrates the freuency and percentage of the respondents@ profile in

terms of years of operation.

T!ble 4

Fre1)e"& !"# Per&e"$!(e D*%$r*b)$*o" o+ $he Re%0o"#e"$%5 Pro+*le A&&or#*"( $o Ye!r% o+

O0er!$*o"

Ye!r% o+ O0er!$*o" Fre1)e"& 6+7 Per&e"$!(e 687

;8= years 9 9

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premises.

Co0o%*$e Me!" :/=; 9/:3 A#here Ver H*(h Le.el

#egend$ 1.%%&1.2'& (ery #o #evel) 1.2*&2.%%& +oderately #o #evel) 2.%1&2.,'& +oderately -igh #evel) 2.,*&.%%& (ery -igh #evel

$s shown in the table, the prescribed practice FThe boo"store records a memorandum

entry /e.g. 0 receipt of 1%% units of boo"s consigned are received on anuary 1 2%1*3 and the

title of products still remains ith the consignor.4 got the highest mean of . with a standard

deviation of .. +n the contrary, the prescribed practice 5The boo"store receives the initial list

prices together ith the signed agreement after examining appropriate terms.4 got the loest

mean of 9.J with a standard deviation of .K. -owe&er, the o&er8all response manifested in the

composite mean is 9.K with the standard deviation of .9; interpreted as fully adhere.

'he said findings are also true with the sur&ey done by 1ational $ssociation of College

2tores A1$C2B A9;B in their Campus 2ur&ey 2er&ices stating that, higher education retail

markets do not encounter problems when it comes to receipt and management of deli&ered

goods. +n the contrary, 1$C2 stated that uantity discrepancies, incorrect goods and damaged

goods are some of the issues encountered by bookstores in the past years.

3n summary, the uni&ersity bookstores sampled fully adhere with the prescribed deli&ery

of goods practices meaning that the bookstores sampled is in unison. 2tarting from the recei&ing

of the deli&ery of goods up to the stocking of the books to the bookstore or central stockroom, all

bookstores sampled ha&e a proper accounting and internal control when it comes to deli&ery of

goods.

:/: R*%' o+ Lo%%, D!!(e% !"# Co"+)%*o"%

'able = shows the mean, standard de&iation, and interpretation of the le&el of adherence

on the prescribed risk of loss, damages and confusions practices of uni&ersity bookstores.

T!ble >

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41

Le.el o+ A#here"&e o" $he Pre%&r*be# R*%' o+ Lo%%, D!!(e% !"# Co"+)%*o"% Pr!&$*&e% o+

U"*.er%*$ Boo'%$ore%

Pre%&r*be# R*%' o+ Lo%%, D!!(e%

!"# Co"+)%*o"% Pr!&$*&e%

Me!" SD A#

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insures the boo"s against all ris"s against hich are customarily insured including insurance

for theft and damage and provides evidence of such insurance coverage to the consignor as and

hen re6uested.4 got the loest mean of 9.; with a standard deviation of .KK. -owe&er, the

o&er8all response manifested in the composite mean is 9.

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. 'he bookstore is reuiring the

purchase of books as collegeacademic reuirements for the

students.

9. .K9$dhere withlimitations

"oderately -ighLe&el

. 'he bookstore agrees with the

consignor@s price and is ?ustifiableenough to ha&e a high demand for the

product for assurance of high &olume

sales.

9.K .9 $dhere (ery -igh Le&el

=. 'he bookstore staff has an oral

tradition of promoting the books and

courtesy to the students.

9.

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3n summary, the uni&ersity bookstores sampled adhere with limitations with the

prescribed efforts to sell practices. 'he uni&ersity bookstores sampled each ha&e their own

marketing strategies in order to sell the books consigned. !roper positioning and ad&ertising

expenses are dependent to the discretion of the consignor and bookstore agreement. Reuiring

students to buy the book as a reuirement is also dependent to the discretion of the uni&ersity

since the students are mostly college students, they ha&e a choice whether they want to buy in the

bookstore or bookstores outside the school.

:/; S!le%, P!e"$ !"# Co*%%*o"

'able J shows the mean, standard de&iation, and interpretation of the le&el of adherence

on the prescribed sales, payment and commission practices of uni&ersity bookstores.

T!ble @

Le.el o+ A#here"&e o" $he Pre%&r*be# S!le%, P!e"$ !"# Co*%%*o" Pr!&$*&e% o+

U"*.er%*$ Boo'%$ore%

Pre%&r*be# S!le%, P!e"$ !"#

Co*%%*o" Pr!&$*&e%

Me!" SD A#

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stipulates proper agreement of

commission rate putting intoconsideration, impro&ement of 2ales

as determinant of commission rate.

Co0o%*$e Me!" :/; 9/34 A#here Ver H*(h Le.el

#egend$ 1.%%&1.2'& (ery #o #evel) 1.2*&2.%%& +oderately #o #evel) 2.%1&2.,'& +oderately -igh #evel) 2.,*&.%%& (ery -igh #evel

$s shown in the table, the prescribed practices FThe boo"store reconciles those received

from hat is recorded at least daily unless ee"ly is more efficient.44 The boo"store records

sales of consigned boo"s as a Debit to Cash and a Credit to Payable to the Consignor.4 and

5:otification of sale expense and remittance are recorded as Debit to Payable to Consignor and

a Credit to Commission ;ncome and Cash unless receivable are already deducted from those

due.4 got the highest means of . with a standard deviation of . for all statements. +n the

contrary, the prescribed practice 5The boo"store remits proceeds of sale of consigned boo"s to

the consignor or to deposit them in a special account on or before the period agreement.4 got the

loest mean of 9.K with a standard deviation of .9. -owe&er, the o&er8all response

manifested in the composite mean is 9.> with the standard deviation of .; interpreted as fully

adhere.

$ccording to $thitakis A9;9B, there is no problem with the management and ins and outs

of sales, payment and commission, but the problem lies with experimenting ideas of impro&ing

them abo&e a&erage.

3n summary, the uni&ersity bookstores sampled fully adhere with the prescribed sales,

payment and commission practices. $ll uni&ersity bookstores sampled are in unison in internal

control and accounting control when it comes sales, payment and commission practices since

these are fixed terms in the consignment agreement and it in&ol&es money that is why strict

management o&er this category is a must to a&oid breach of contract.

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:/> Re$)r" o+ Pro#)&$%

'able K shows the mean, standard de&iation, and interpretation of the le&el of adherence

on the prescribed return of products practices of uni&ersity bookstores.

T!ble =

Documents

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