Consignment Accounts:- Consign means to send. In accounting, consignment account deals with the situation where one person sends goods to another person on the basis that the goods will be sold on behalf of and at the risk of the former.
Important Points:-
- The party which sends the goods is called consignor.
- The party to whom goods are sent is called consignee.
- The relationship between consignor and consignee is of principal and agent.
- The ownership of the goods, i.e., the property in the goods, remains with the consignor or the principal the agent or the consignee does not become their owner even though goods are in his possession.
- On sale, the buyer will become the owner.
- The consignor does not send an invoice to the consignee but sends only a proforma invoice. Proforma invoice is only means to convey information to the consignee regarding particulars of the goods sent.
- The consignee receives a commission for his work on the basis of gross sale.
- For ordinary commission, the consignee is not responsible for any bad debt.
- , In case of del-credere commission, the consignee is responsible for bad debts . Del-credere commission is calculated on total sales, not merely on credit sales until and unless agreed.
- The consignee recovers all expenses incurred by him on the consignment from the consignor. However this can be changed by agreement between the two parties.
- The consignee to give an advance to the consignor in the form of cash or a bill of
- exchange. It is adjusted against the sale proceeds of the goods.
- Periodically, the consignees a statement called Account Sales sends to the consignor. It contains sales made by the consignee, the expenses incurred on behalf of the consignor, the commission earned by the consignee and the balance due to the consignor.