Want to Know What is Consignment, if Yes then this Article is for You.
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Introduction :
Consignment Meaning and Definition?
It is a Specialized Kind of transaction Between a Person( Called Consignor) and another person (Called Consignee),
whereby the Consignor sends Goods to the Consignee to be sold by the latter on behalf of the former for a mutually agreed commission, The basic relationship between the consignor and consignee is that of a principal and agent,
the idea Behind consignment is to tap more customers at far-flung places, Where it may not be practical for the consignment facilitates the expansion of business without opening of branches at different localities.
It is regarded as a cost-saving device because the opening of branches will involve high initial costs. The primary objective of the consignment is to enable the business to become a market leader without the help of a wholesaler and retailer because goods are sent by the manufacturer or wholesaler to an agent.
IMPORTANT TERMS
What is consignment?
Ans: A Shipment of Goods by a Manufacturer or Wholesaler an Agent to be Sold by him on a Commission basis on the risk and behalf of the former is known as Consignment.
Consignor`?
Ans: This Person who Sends goods to the agent to be sold by him on a commission basis is called a consignor, He is the owner of such goods.
Consignee?
Ans. The Person to whom the goods are sent for sale on a commission basis is called a consignee. He is the agent of the consignor and will receive a commission.
What is Pro-forma invoice?
Ans: Generally, the consignor receives advice against the goods from the consign either cost price or invoice price for which the consignor makes a bill is called a proforma invoice.
STEPS FOR CONSIGNOR
- Consignor Send Goods to Consignee
- Consignor incurs on goods send
- Consignee incurs some expenses on goods
- Consignee gives some advice to the consignor
- Consignee sold goods
- Consignee gets a commission on sales
- Value of stock on consignment on sold goods
| Quotation | Answer |
| What is Over-Riding Commission? | it is an extra commission allowed over and above the normal commission to the consignee because of hard work in introducing a new product in the market. |
| What is Account Sales? | It is a statement that is prepared by the consignee after realizing the money and sending it to the consignor. It Contains details of sales expenses incurred, Commission, and the balance due to the consignor. |
| What is Stock Reserve? | The profit included the invoice price of unsold stock. |
| What is Remittance? | It is an amount sent by the consignee to the consignor in the form of a Cheque bill or draft |
| What is Unloading? | It is a charge paid by the consignor and consignee for goods. |
| What is an Invoice? | It is a statement that shows the quantity, price, credit term, and value of goods sold. |
| What is the Invoice price? | The price which is charged as a certain percentage of the cost price over the goods consigned. |
| What is Normal loss? | Such types of losses are unavoidable, they may arise due to the inherent nature of goods such as evaporation, etc. |
| What is Abnormal loss? | Such types of losses are avoidable, they may arise due to pilferage theft, fire, excessive breakage & negligence, etc. |
| What is Commission? | The remuneration payable by the consignor to the consignee for making the sale of goods is called commission it is an expense on the consignment. |
| What is Delcredere Commission? | It is an additional commission paid by the consignor to the consignee for bearing the loss on account of bad debt arising out of credit sale. |
| What is Ordinary Commission? | This type of commission is given on the total sale made by the consignee |
What is Book-Keeping?
Ans: Recording Transactions of Money is Called Book-Keeping.
What is Accounting?
Ans: Recording, Classifying, and Summarizing Transaction of Money is Called Accounting.
What are Assets?
Anything of use for Future operations is Called Assets.
In The Books of Consignor Consignment A/c (Proforma of Consignment Account on Cost basis)
| Particular | Amt/Rs Dr. | Particular | Amt/Rs Cr. |
| To Goods sent on Consignment A/C (When consignor sent goods to consignee) | XXX | By Consignee A/c (When Consignee sold goods) | XXX |
| To Cash A/c (When Consignor in Current Expenses) | XXX | By Stock on Consignee A/c (When unsold stock on consignment) | XXX |
| To Consignee A/c (When Consignee incurring Expenses) | XXX | By Consignee A/c (When Goods taken by consignee) | XXX |
| Consignee A/c (When Consignee gets commission) | XXX | By Consignment Stock A/C (With Cost or market price least) | |
| To Profit and Loss A/c (Profit on Consignment) | XXX | By Profit and Loss A/c (For loss on Consignment) | |
| XXX | XXX |
In The Books of Consignor Consignment A/c (Proforma of Consignment Account on Cost basis)
| Particular | Amt/Rs Dr. | Particular | Amt/Rs Cr. |
| To Consignment A/c (When Sale effected) | XXX | By Bank/B/R/Cash A/c (Advance Received ) | XXX |
| To Cash A/c (When Consignor in Current Expenses) | Consignment A/c (For expenses incurred by consignee) | XXX | |
| Consignment A/c (For Commission) | XXX | ||
| By Bank/B/R/Cash A/c (For the balance received ) | XXX | ||
| XXX | XXX |
Conclusion
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Disclaimer
The help of many websites has been taken to write this article as well as the books posted on the official C.H.S.E Syllabus ( Mr.Mohan Juneja, Baljindar Singh , R.k Mahajan ) have been used.