consignment accounting

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