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Home Accounting For Consignment/Consignment Accounts Consignment Accounting Journal Entries

Consignment Accounting Journal Entries:

Learning Objectives:

  1. Make journal entries in the books of consignor and that of consignee.

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. The recording of the consignment transactions in the books of the consignor and consignee will be made in the following manner:

Accounting Entries in the Books of Consignor:

(1) On dispatch of goods:-  
  Consignment account

(With the cost of goods)

       To Goods sent on consignment account
(2) On payment of expenses on dispatch:-  
  Consignment account

(With the amount spent as expenses)

       To Bank account
(3) On receiving advance:  
  Cash or bills receivable account

(With the amount cash or bill)

       To Consignee's personal account
(4) On the consignee reporting sale (as per A/S):-  
  Consignee's personal account (With gross proceeds of sales)
     To Consignment account
(5) For expenses incurred by the consignee (as per A/S):-  
Consignment account

(With the amount of expenses)

       To Consignee's personal account
(6) For commission payable to the consignee:-  
  Consignment account

(With the amount of expenses)

       To Consignee's personal account

Assuming that all the goods sent have been sold, the consignment account will show at this stage the actual profit or loss made on it. The same is transferred to profit and loss account.

The entry in case of profit is:

  Consignment account  
       To profit and loss account  

In case of loss the entry is:

Profit and loss account
     To Consignment account

Note: The goods sent on consignment account may be closed by a transfer to trading account.

When Consignment is Partly Sold:

When all the goods sent on consignment have not been sold., the value of unsold goods in the hands of the consignee must be ascertained and the profit or loss should be found out by taking this stock into account. The entry is:

Stock on consignment account
     To Consignment account

Stock on consignment account is an asset and will be shown in the balance sheet of the consignor. Valuation of stock is discussed on valuation of stock page.

Accounting Entries in the Books of Consignee:

(1) When consignment goods are received:-
No entry is made in the books of account. The consignee is not the owner of the goods and therefore he makes no entry when he receives the goods.

(2) For expenses incurred by the consignee:-
Consignor's personal account
     To Cash account
(3) When advance is given:-
Consignor's personal account
     To Cash or bills payable account

(4) When goods are sold:-
Cash or bank account
     To Consignor's personal account

(5) For commission due:-
  Consignor's personal account  
     To commission account

The consignor's account will be closed by debiting it with cash or final bill or draft in settlement.

You may also be interested in other articles from "accounting for consignment" chapter:

  1. Definition and Explanation of Consignment
  2. Distinction/Difference Between Consignment and Sale
  3. Definitions of Important Terms Used in Consignment Accounting
  4. Consignment Accounting Journal Entries
  5. Valuation of Unsold Stock Or Closing Stock in Consignment Accounting
  6. Valuation and Treatment of Normal and Abnormal Loss in Consignment Accounting
  7. Invoicing Goods Higher Than Cost in Consignment
  8. Consignment Accounting Problems, Exercises and Questions
  9. Consignment Accounting Questions and Answers


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