Consignment
It is a principal and agent relationship.
Person who sends goods will be consignor.
Person who receive the goods will be consignee.
Performa invoice – consigner provides to consignee for the details of goods like quantity, price etc.
Account sales – periodically consignee sends details of transaction to consignor.
Risk of goods will be borne by consignor.
Consignee will receive following three types of commission.
Normal commission – on actual sales.
Del creder commission – risk of bad debt will be born by consignee. If question is silent it will be paid on total sales.
If specifically given in question then on credit sales.
Overriding commission :
If consignee sales goods over and above fixed price, excess commission will be paid to consignee.
Normal loss :
It is unavoidable loss like petrol lost in atmosphere. It is uncontrollable.Cost of normal loss will be borne by good units. E.g. 100 kgs. Price
Rs. 10, normal loss 10%
Cost per unit = 100*10/90=11.11111
Abnormal loss : it is due to accident or negligence, like fire, road accident etc.
Loss on abnormal reason will be transferred to profit and loss account.
In the books of consignor following accounts will be prepared.
Consignment a/c
Consignee a/c
Goods sent on consignment
Consignment stock account.
Consignment account is a nature of profit and loss account.
Profit will be transferred to profit and loss account.
Expenses will be debited, income will be credited.
Journal entries :
goods sent on consignment
consignment account Dr.
To goods sent on consignment a/c
Goods sent on consignment a/c dr.
To trading account
Expenses of consignor
Consignment a/c dr.
To bank a/c
Expenses of consignee and commission
Consignment a/c dr.
To consignee a/c
Sales
consignee a/c dr.
To Consignment a/c
Opening stock
Consignment a/c dr.
To stock a/c
Closing stock
Stock a/c dr.
To Consignment a/c
There are various types of stock
Stock in transit/loss in transit
Cost = purchase price+consignor’s proportionate expenses
Stock in consingee’s godown / loss in consingee’s godown
Purchase price + consignor’s all expenses+ consignee’s direct expesnes (i.e. upto reaches to godown)
It excludes godown rent and insurance.
Students are confused between joint venture and consignment. It is clear that joint venture is a partnership.
While consignment is a principal and agent relationship.
While calculation of remittance in JV, JV and co venture both accounts are important.
In consignment only consignee account is sufficient.
Invoice price :
When consignor will not show to consignee his actual cost, he will send goods to consignee at cost + profit.
Invoice piece = cost + profit.
Profit element included in closing stock will be unrealized gain which cannot be treated as profit.
Loading in goods sent :
Goods sent on consignment a/c dr.
To consignment a/c
(profit element included in goods sent)
Profit in opening stock
Stock reserve a/c dr.
To consignment a/c
(Only profit portion)
Profit in closing stock
Consignment a/c dr.
To stock reserve a/c
(Only profit portion)
- I P = cost +50%
- IP = COST + 33.33 %
- IP = COST+ 25% ON IP
IP OF GOODS SENT 10,00,000
Find cost.
A consigns goods of Rs. 100000 incurring expenses of Rs.10000. B received goods of costing Rs. 90000 incurring expenses 4500 freight, 3000 godown rent and 2000 insurance. Out of remaining goods 4000 yet in transit. Insurance company paid 50% of cost including expenses.
2/3 goods are sold at Rs. 80000.
Commission 5%. Prepare consignment account and B’s account.
v Consignment account
| Particulars | Rs. | Particulars | Rs. |
| To goods sent on consign. | 100000 | By B sales | 80000 |
| To bank | 10000 | By stock in transit | 4400 |
| To B | By bank 50% | 3300 | |
| Freight | 4500 | By p& l 50% | 3300 |
| Rent | 3000 | By closing stock | 34500 |
| Insurance | 2000 | ||
| Commission | 4000 | ||
| By p&l | 2000 | ||
| 125500 | 125500 |
By loss in transit
6000 + 600(10000*6000/100000)=6600
By stock in transit
4000 + 400(10000*4000/100000)=4400
Closing stock
90000*1/3=30000+3000(10000*30000/100000)+1500(4500*1/3) = 34500
B’s account
| Particulars | Rs. | Particulars | Rs. |
| To consign. | 80000 | By consign. | |
| Freight | 4500 | ||
| Rent | 3000 | ||
| Insurance | 2000 | ||
| commission | 4000 | ||
| By bank | 66500 | ||
| 80000 | 80000 |
X Consigns goods to Y of Rs. 70000 at cost + 50% of cost. 50% of goods sold at Rs. 65000
1 Commission 10% of sales +25% of sales exceeds IP
2 Commission 10% of sales +25% of sales exceeds Cost
3 Commission 10% of IP + 25% of IP exceeds cost
- 10% of ip and 20% of sales exceeds all commission over IP
- 10% of ip and 20% of sales exceeds all commission over cost
- 10% of sales and 20% of sales exceeds all commission over IP
- 10% of sales and 20% of sales exceeds all commission over cost
Find commission
Answer :
Cost 35000
IP 52500(70000*50/100)150%
Sales 65000
1 6500+25/100(65000-52500) =9625
2 6500+25/100(65000-35000) =14000
3 5250+25/100(52500-35000)= 9625
4 sale 65000
Less : IP 52500
Less:normal 5250
Balance 7250*20/120= 1208
Total commission 5250+1208= 6458
5 sale 65000
Less : cost 35000
Less:normal 5250
Balance 24750*20/120= 4125
Total commission 5250+4125= 9375
6 sale 65000
Less : IP 52500
Less:normal 6500
Balance 6000*20/120= 1000
Total commission 6500+1000= 7500
7 sale 65000
Less : cost 35000
Less:normal 6500
Balance 23500*20/120= 3917
Total commission 6500+3917=10417
X consigns goods to Y 50000 at cost+20% of IP. 60% of goods sold at Rs. 45000.
1 Commission 10% of sales +25% of sales exceeds IP
2 Commission 10% of sales +25% of sales exceeds Cost
3 Commission 10% of IP + 25% of IP exceeds cost
4 10% of ip and 20% of sales exceeds all commission over IP
5 10% of ip and 20% of sales exceeds all commission over cost
6 10% of sales and 20% of sales exceeds all commission over IP
- 10% of sales and 20% of sales exceeds all commission over cost
Find commission
Cost 30000
IP 37500(50000*60/100)125%
Sales 45000
1 4500+25/100(45000-37500) =6375
2 4500+25/100(45000-30000) =8250
3 3750+25/100(37500-30000)= 5625
4 sale 45000
Less : IP 37500
Less:normal 3750
Balance 3750*20/120= 625
Total commission 3750+625= 4375
5 sale 45000
Less : cost 30000
Less:normal 3750
Balance 11250*20/120= 1875
Total commission 3750+1875= 5625
6 sale 45000
Less : IP 37500
Less:normal 4500
Balance 3000*20/120= 500
Total commission 4500+500= 5000
7 sale 45000
Less : cost 30000
Less:normal 4500
Balance 10500*20/120= 1750
Total commission 4500+1750=6250
question :
X consigned the goods costing 50000 at a IP (IP = cost +25% profit on IP), 10% of goods sent lost in transit, 90% of remaining is received. 3/5th of goods received are sold at Rs. 60000. Consignor’s expenses 5000. While consingee’s expenses non recurring 4000. Recurring 5000.
Commission 10% of sales value + 25% of sales exceed cost.
½ of balance goods lost in godown. Prepare consignment account and Y’s account.
Consignment account
| Particulars | Rs. | Particulars | Rs. |
| To goods sent on consign. | 66667 | By goods sent on cons.(loading) | 16667 |
| To bank | 5000 | By stock in transit(4500*110%) | 4950 |
| To B | By abnormal loss-p & l 55000*10% | 5500 | |
| Non Recurring | 4000 | By sales | 60000 |
| Recurring | 5000 | By Loss in godown WN2 | 9710 |
| CommWN1 | 14925 | By closing stock WN3 | 12410 |
| Stock res.
8100*33.33 |
2700 | ||
| By p&l | 10945 | ||
| 109237 | 109237 |
WN 1
commission
10*60000/100 = 6000
25/10(60000-24300)= 8925
TOTAL =6000+7140 = 14925
Closing stock sent 50000
Less : Loss 10% 5000
Less : transit 10% 4500
Of balance 40500
Cogs 40500*3/5= 24300
Balance 16200
WN Loss in godown
½ Of stock 8100
Consignor’s expenses 810
Consignee expenses 800
9710
40500 : 4000
8100 : ? 800
WN closing stock
STOCK IN GODOWN
½ Of stock 10800
Consignor’s expenses 810
Consignee expenses 800
12410
40500 : 4000
8100 : ? 800