Accounting For Consignment / Consignment Accounts:

Definition and Explanation of Consignment:

The word consignment can be generally defined as the act of sending a quantity of goods by the manufacturers and producers of one country or place to their agents in another at the risk of the principal for the purpose of sale. Click here to read full article.

Distinction/Difference Between Consignment and Sale:

In case of sale, the legal ownership of the goods sold is transferred to the purchaser of goods. Whereas in case of a consignment of goods , the legal ownership of the goods is not transferred to the consignment but the ownership of the goods remains vested in the consignor till the goods consigned are sold by the consignee. Click here to read full article.

Definitions of Important Terms Used in Consignment Accounting:

Find the definitions of some important terms used in accounting   for consignment Click here.

Consignment Accounting Journal Entries:

As the goods sent on consignment by the consigner are not his sales, he must not record consignment as sales and the consignee must must not record them as purchases. The consigner should not take up any profit on the transaction until the goods have been actually sold by the consignee. Since the goods still belong to the consignor, any unsold goods in the hands of the consignee at the end of the trading period should be included in the consignor's stock. Click here to read full article.

Valuation of Unsold Stock Or Closing Stock in Consignment Accounting:

The valuation of stock laying with the consignee at the time of final closing of the account of the consignor is generally made at cost or market price whichever is less. Click here to read full article.

Normal loss of goods should also be considered while valuing the closing stock or unsold stock. Normal loss means inherent and unavoidable loss. For example if a certain quantity of coal is consigned, some of it is bound to be lost because of loading and unloading and because of some of it turning into dust. In the nature of coal shortage is unavoidable. Click here to read full article.

Sometimes in place of sending the goods to the consignee at cost price the consignor invoices them at higher price, the object being not to disclose to the consignee the amount of consignor's profit. Click here to read full article.

A number of solved problems about consignment accounting. Click here to see

Find the answers of various general questions about consignment accounting. Click here.