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CONSIGNMENT ACCOUNTING

1. Consignment Sale: - Where one person in firm sends goods to another person or firm on the basis that the goods
will be sold on and at the risk of the former, it is called consignment sale.

2. The party who sends the goods is called consignor or principal and the party to whom goods aresent is called consignee
or agent.

3. The relationship between the consignor and the consignee is that of principal and agent.

4. Documents related to consignment transactions:

(a) Performa invoice: - it is prepared by consignor for the consignee stating details regarding goods sent on consignment i.e.,
quantity, rate, value etc.

(b) Account Sales: - After sale of goods, consignee sends a statement to consignor, This statement is called account
sales. In this statement gross value, expenses and commission of consignee, advance paid by consignee and net amount
due by consignee are shown.

5. Accounting for consignment business in the Books of consignor: - Following accounts are prepared in
the book of consignor:
(a) consignment account- It is a nominal account.
(b) Goods sent on consignment account.
(c) Consignee account
(d) Consignment stock account
(e) Consignment debtors account – only if del credere commission is not allowed to the consignee

6. Distinction between consignment and sale: -

Consignment Sale
Ownership of goods is not transferred to consignee. Ownership of goods is transferred to the buyer.

Consignee is not liable for losses. Buyer is liable for losses.

All expenses are born by consignor. Buyer meets his own expenses.

The document sent along with goods sent to The document sent on sale of goods is called
consignee is called 'Performa invoice". 'Invoice'.

Consignee does not become debtor on receipt of Buyer becomes debtor immediately on receipt of
goods. He becomes debtor on sale of goods. goods.

Consignee receives commission on sale of goods. Buyer does not receive any commission. He earns
profit on sale of goods.
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7. Distinction between Abnormal Loss And Normal Loss: -

Abnormal Loss Normal Loss
➢ Abnormal loss occurs due to accident natural calamities ➢ Normal loss occurs due to inherent characteristic
or negligence. of goods, e.g. normal leakage, evaporation etc.

➢ This loss does not affect Gross Profit. ➢ This loss effect Gross Profit.

➢ Accounting entry is made for such loss. ➢ No accounting entry is made for such loss.
Thisis automatically absorbed in Gross profit.

➢ This loss can be insured against various contingencies. ➢ This loss cannot be insured.

➢ This loss is not certain. This depends on the happening ➢ This loss is almost certain.
of certain event.

8. Journal entries in the book of consignor and consignee: -

Situations Consignor’ book Consignee’s book
i. On sending goods. Consignment account Dr. No entry
To goods sent on consignment a/c
ii. On expenses incurred by Consignment account Dr. No entry
consignor on sending goods. To bank/ creditors for exp. a/c
iii. On expenses incurred Consignment account Dr. Consignor account Dr.
by the consignee. To consignee account To bank/creditor for expense
iv. On consignee reporting Consignee account Dr. bank/consignment debtor Dr.
sales. To Consignment account To consignor account

v. For commission due. Consignment account Dr. Consignor account Dr.

To consignee account To commission account
vi. For bad debts:- Commission account Dr.
a. if del-credere commission No entry To bad debts account
allowed.
b. If del-credere commission Consignment account Dr No entry
is not allowed. To consignee account

vii. for closing the For profit:

consignment account. Consignment account Dr. No entry
To general profit and loss account
Note: Reverse entry in case of loss.
viii. for advances received Cash/bank/ B/R A/c Dr. Consignor account Dr.
from consignee. To consignee account To Cash/bank/ B/P A/c

ix. for closing the goods sent Goods sent on consignment a/c Dr. No entry
on consignment account. To trading/purchases account
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Accounting treatment in the book of consignor

Format of consignment account

Particulars Amount Particulars Amount
To Goods sent on consignment 2,00,000 By consignee account: 5,00,000
To bank account: 40,000 (Sales made by consignee)
(Expenses incurred by consignor)
By stock on consignment 50,000
To consignee account: 30,000
(Expenses incurred by consignee)

To consignee account: 50,000

(Commission to consignee)

To profit & loss account:

Profit on consignment 2,30,000
5,50,000 5,50,000

Format of consignee account

Particulars Amount Particulars Amount

To consignment account 5,00,000 By consignment account 30,000

(expenses incurred by consignee)

By consignment account 50,000

(commission)

By bank account 4,20,000

Note: In case advance is also given by consignee Rs 1,00,000.

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Let’s start revision of practical questions ( Zameen se Aasmaan tak):

Rapid revision question 1. 20,000 units of commodity ‘X’ were consigned by Ram of Delhi at an invoice cost of
₹100 each to Mohan of Mumbai. Ram paid freight ₹12,000, Insurance ₹8000. Mohan received the consignment
and incurred the following expenses: -

Clearing charges = ₹5,000

Freight to the godown = ₹7,000

Rent of godown = ₹3,000

Insurance = ₹2,000

Advertisement = ₹12,000
Loading and unloading charges = ₹3,000

Mohan sold 80% of the goods @ ₹250 each. He was entitled to a commission of 5% on sales. Prepare consignment
account and Mohan account in the book of Ram.

Solution: In the book of Consignor

Consignment account
Particulars Amount Particulars Amount
To goods sent on consignment 20,00,000
By Mohan account:(sales) 40,00,000
To bank account: (16,000 X 250)
Freight 12,000
Insurance 8,000 20,000
4,07,000
By stock on consignment
To Mohan account: (4000 units)

Clearing charges 5,000

Freight 7,000
Rent of godown 3,000
Insurance of godown 2,000
Advertisement 12,000
Load& unload 3,000 32,000

To Mohan account: (commission) 2,00,000

To P& L account (Profit)
21,55,000
44,07,000 44,07,000

Mohan account
Particulars Amount Particulars Amount
To consignment a/c (sale) 40,00,000 By consignment a/c (expenses) 32,000
By consignment a/c (commission) 2,00,000
By bank account (bal. fig) 37,68,000

40,00,000 40,00,000
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Working notes:
Computation of value of closing stock:

Particulars Units Amount

Purchase price of goods sent on consignment 20,000 20,00,000
Add: Non- recurring expenses incurred by the consignor 20,000
20,000 20,20,000
Add: Non-recurring expenses incurred by the consignee
15,000
Total cost of goods sent on consignment 20,000 20,35,000

𝟒,𝟎𝟎𝟎 4,07,000
Value of closing stock (20,35,000 X )
𝟐𝟎,𝟎𝟎𝟎

9. Types of commission:

a. Ordinary Commission: Ordinary commission is a commission which consignee gets as his remuneration from
the consignor for the sales made on behalf of the consignor. It is calculated on total sales (if not mentioned)
b. Over ridding commission. It is allowed to increase sales volume/ sales price. It is calculated as per
instruction given in question.
c. Del – Credere Commission: - The additional commission for which the consignee guarantees debt is called
del- credere commission. This commission save consignor from loss of bad debts only. The agent is responsible
for bad debts but not for loss due to a dispute between the buyer and the seller.
➢ The del-credere commission is payable on total sales and not merely on credit sales.

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10. Concept of losses in consignment account: -

(A) Treatment of abnormal loss:

Rapid revision question 2( concept of abnormal loss in consignee’ godown). 5,000 units of commodity ‘X’ were
consigned by Monu to Sonu @ ₹40 each. Monu incurred ₹20,000 on sending the goods to consignee.
Sonu received the consignment and sent an account sale showing that 70% of goods received were sold @ ₹100 each.
He also informed that 10% of the consignment were lost due to fire in his godown. Insurance company admitted the
claim for ₹12,000.
He incurred ₹20,000 as selling and ₹8,000 as non-selling expenses.
He was entitled to general commission @ 5% and del-credere commission of 10%. Actual loss due to bad debts are
₹4,000, Prepare consignment Account and Sonu Account in the book of Monu.

Solution: - In the book of Monu(Consignor)

Consignment account
Particulars Amount Particulars Amount
To goods sent on consignment 2,00,000 By Sonu account(sales) 1,40,000
To bank account: 20,000 (3,500 X 40)

To Sonu account: By abnormal loss (godown) 22,800

Selling expense 20,000 (500 units)
Non-selling 8,000 28,000
To Sonu account (commission): By stock on consignment
General – 7,000 (1,000 units) 45,600

Del-credere- 14,000
By Loss on consignment trf
21,000
to P& L account
60,600
2,69,000 2,69,000

Sonu account
Particulars Amount Particulars Amount
To consignment a/c (sale) 1,40,000 By consignment a/c (expenses) 28,000

By consignment a/c (commission) 21,000

By bank account (bal fig)
91,000

1,40,000 1,40,000

Abnormal loss account:

Particulars Amount Particulars Amount
To consignment a/c 22,800 By Insurance company A/c 12,000
By profit & loss account 10,800
22,800 22,800

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Working notes: - Computation of value of closing stock:

Particulars Units Amount
Purchase price of goods sent on consignment 5,000 2,00,000
Add: expenses incurred by the consignor 20,000
5,000 2,20,000
Add: expenses incurred by the consignee
8,000
Total cost of goods sent on consignment 5,000 2,28,000
𝟓𝟎𝟎 (500) (22,800)
Less: value of abnormal loss (2,28,000 X )
𝟓,𝟎𝟎𝟎

Balance 4,500 2,05,200

𝟏,𝟎𝟎𝟎 45,600
Value of closing stock (2,05,200 X )
𝟒,𝟓𝟎𝟎

Inportant note for revision:

Case 1: If Insurance claim is admitted by Insurance company:

Insurance company account Dr

To abnormal loss account

Case 2: if insurance claim is received by consignor:

Bank account Dr

To Abnormal loss account

Case 3: If insurance claim is received/ receivable by the consignee:

Consignee account Dr

To abnormal loss account

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Rapid revision question 3 (concept of abnormal loss in transit). 5,000 units of commodity X were consigned by
Mohanlal to Sohan Lal @ ₹40 each. Mohanlal incurred ₹20,000 on sending the goods to consignee. During transit
10% of the consignments were damaged due to fire. Insurance company admitted the claim for ₹12,000.
Sohan Lal received the remaining consignment and sent an account sale showing that 70% of goods received
were sold @ ₹100 each. He incurred ₹20,000 as selling and ₹8,000 as non-selling expenses. He was entitled to
commission @ 5%.
Calculate value of abnormal loss and closing stock.

Answer: - Computation of value of abnormal loss and closing stock: -

Particulars Units Amount
Purchase price of goods sent on consignment 5,000 2,00,000
Add: expenses incurred by the consignor 20,000
Balance 5,000 2,20,000
Less: abnormal loss (in transit) (500) (22,000)

Balance 4,500 1,98,000

Add: expenses incurred by the consignee 8,000
Balance 4,500 2,06,000
𝟏𝟎𝟎 45,778
Value of closing stock 2,06,000 X )
𝟒,𝟓𝟎𝟎

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(B) Treatment of normal loss:

Rapid revision Question 4. 5,000 units of commodity ‘X’ were consigned by Monu to Sonu @ ₹40 each. Monu
incurred ₹20,000 on sending the goods to consignee.
Sonu received the consignment and sent an account sale showing that 70% of goods received were sold
@ ₹100 each. He also informed that 10% of the consignment were lost due to unavoidable reasons in his godown.
He incurred ₹20,000 as selling and ₹8,000 as non-selling expenses.
He was entitled to general commission @ 5% and del-credere commission of 10%.
Calculate value of normal loss and closing stock.
Answer: - Computation of value of closing stock and normal loss: -

Particulars Units Amount (₹)

Purchase price of goods sent on consignment 5,000 2,00,000
Add: expenses incurred by the consignor 20,000
5,000 2,20,000
Add: expenses incurred by the consignee
8,000
Total cost of goods sent on consignment 5,000 2,28,000
Less: value of normal loss (500) nil
Balance 4,500 2,28,000
Value of closing stock 2,28,000 X 1,000/4,500 50,667

Note: if normal loss and abnormal losses occur at the same time, then:-
………………………………………………………………………………………………………………………………………………………
………

11. Concept of advance against security / security given: -

Journal entry for advance received/ security received:
Bank / Bills receivable A/C Dr
To consignee account

Treatment in Consignee account: Consignee account

Particulars Amount Particulars Amount

By bank/ B/R account 2,00,000
(assume on 100 units)

To balance c/d (assume closing stock of 10

units) (
𝟐,𝟎𝟎,𝟎𝟎𝟎
X 10) 20,000
𝟏𝟎𝟎

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12. Concept of invoice price in consignment account: -

(1) If goods have been sent at invoice price (loaded price), then firstly all information related to goods arerecorded
at invoice price and then reverse entry will be passed with load amount to make them equal to cost price.
(2) value of abnormal losses will always be recorded at cost price. It does not matter whether goods have been
sent at cost price or invoice price.

13. Treatment of Discount charges on bills receivable discounted by Consignor: -

There are two alternative treatments for the aforesaid discount:
• If discount is treated as "consignment expenses" it is debited to consignment account.
• If discount is treated as "financial charges', it is debited to profit and loss account.
Note:- if not mentioned, we should assume it as financial charges and a proper note should be given along with
your answer.

Rapid Revision question 5. Shri Mehta of Mumbai consigns 1,000 cases of goods costing ₹1,000 each to
Shri Sundaram of Chennai. Shri Mehta pays the following expenses in connection with consignment:

Particular ₹

Carraige 10,000

Freight 30,000

Loading charges 10,000

Shri Sundaram sells 700 cases at ₹1,400 per case and incurs the following expenses:

Clearing charges 8,500

Warehousing and storage 17,000

Packing and selling expenses 6,000

It is found that 50 cases have been lost in transit and 100 cases are still in transit.

Shri Sundaram is entitled to a commission of 10% on gross sales. Draw up the Consignment Account and
Sundaram’s Account in the books of Shri Mehta.

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Answer: - Consignment Account

Particular ₹ Particular ₹
To Goods sent on Consignment 10,00,000 By Sundaram (sales) 9,80,000
To Bank (Expenses) 50,000 By Loss in Transit 50 cases 52,500
To Sundaram (Expenses) 31,500 @₹1,050 each
To Sundaram (Commission) 98,000 By Consignment Inventories:
To Profit on Consignment 1,17,000 In Hand 150 @₹1,060 each 1,59,000
In Transit 100 @₹1,050 each 1,05,000 2,64,000
12,96,500 12,96,500

Sundaram Account

Particular ₹ Particular ₹
To Consignment to Chennai A/c 9,80,000 By Consignment A/c (Expenses) 31,500
By Consignment A/c (Commission) 98,000
By Balance c/d 8,50,500
9,80,000 9,80,000

Working notes:
Particulars Units Amount (₹)
Purchase price of goods sent on consignment 1,000 10,00,000
Add: expenses incurred by the consignor 50,000
1,000 10,50,000

𝟏𝟎,𝟓𝟎,𝟎𝟎𝟎
Less: Abnormal loss (in transit) x 50 -50 -52,500
𝟏,𝟎𝟎𝟎

𝟏𝟎,𝟓𝟎,𝟎𝟎𝟎 -100 -1,05,000

Less: Value of stock in transit x 100
𝟏,𝟎𝟎𝟎
Balance 850 8,92,500
Add: expenses incurred by the consignee 8,500
Balance 850 9,01,000

𝟗,𝟎𝟏,𝟎𝟎𝟎 1,59,000
Value of closing stock x 150
𝟖𝟓𝟎

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Rapid revision question 6: On 1st January 2025, goods cost price of which was ₹66,000 were consigned by Ram of
Delhi to Agent Haldi of Dadri at a Performa invoice price of 20% above cost. Haldi paid freight and other
forwarding charges amounting to ₹2,000. He was allowed ₹12,000 p.a towards establishment cost; 5% commission on
gross sales and 3% del credere commission. Haldi paid ₹500 as rent of godown for 3 months ended 31 st March 2025.
Three fourth of the goods were sold for ₹66,000, half of which were credit sales. Half of the balance of the goods were
stolen, but the stock being insured, a claim lodged for ₹7,000 was settled for ₹6,900. Write up the consignment
account, consignee's account and stock lost on consignment account as on 31 st March 2025 in the books of Ram.

Solution: Consignment to Dadri Account

To Goods Sent on Consignment Account By Haldi ' A/c (Sales): -

(66,000+13,200) 79,200 Cash Sales 33,000
Credit Sales 33,000 66,000
To Haldi (Expenses): -
Freight and other By Goods Sent on Consignment 13,200
forwarding charges 2,000 (Load)
Establishment cost 3,000 By Abnormal Loss(Goods stolen) 8,500
(12,000 x3/12)
Godown Rent 500 By Consignment Stock A/c
5,500
To Haldi (Commission): - (At Invoice Price) 10,150
(5% on Rs. 66,000) 3,300
(3% on Rs. 66,000) 1,980 5,280

To Stock Reserve Account 1,650

To Profit and Loss Account 6,220

97,850 97,850

Working notes: -
(i) Total goods sent = 1
(ii) Goods sold proportion = ¾
𝟑 𝟏
Balance goods = 1- - =
𝟒 𝟒

𝟏 𝟏 𝟏
(iii) Abnormal loss = X =
𝟒 𝟐 𝟖
𝟏 𝟏 𝟏
(iv) proportion of closing stock = - =
𝟒 𝟖 𝟖

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(v) Computation of value of loss and stock:

Particulars Units Amount (₹)

Purchase price of goods sent on consignment 1 66,000
Add: expenses incurred by the consignor nil
Balance 1 66,000
Add: expenses incurred by the consignee 2,000
Total cost of goods sent on consignment 1 68,000
Less: value of abnormal loss 𝟏 (8,500)
𝟖
Balance 𝟕 59,500
𝟖
Value of closing stock (cost) 8,500
𝟏 1,650
Load (13,200 X )
𝟖

Invoice price of closing stock 10,150

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CONCEPT OF FALL IN MARKET PRICE OF GOODS IN CLOSING STOCK:

Rapid revision question 7:
Goods sent on consignment = 5,000 units of Rs 20 each.
Invoice price = Rs 25/unit
Expenses incurred by the consignor = Rs 8,000
Expenses incurred by the consignee:
Recurring expenses= Rs 5,000
Non-recurring expenses= Rs 10,000
Consignee sold 80% of the consignment @ Rs 40 each.
Commission on sales = 10%
Calculate value of closing stock if:

(a) value of stock in hand is to be reduced by 10%.

(b) Market price of closing stock is expected to be Rs 19/unit due to fall in market demand.

Solution: In the book of consigner

Consignment account

Particulars Amount Particulars Amount

To goods sent on consignment 1,25,000 By goods sent on consignment 25,000
(5,000 X 25) (load)

To bank account 8,000 By consignee account 1,60,000

(4,000 X 40)
To consignee account:
Recurring expenses 5,000 By stock on consignment ?
Non-recurring expense 10,000 15,000 (10,000 units)

To consignee account (commission) 16,000

Working notes:
Units Amount
Units sent on consignment 5,000 1,00,000
Add: Non recurring expenses incurred by consignor 8,000
5,000 1,08,000
Non recurring expenses incurred by consignee 10,000
5,000 1,18,000

𝟏,𝟏𝟖,𝟎𝟎𝟎
Cost of closing stock = X 1,000 = 23,600
𝟓.𝟎𝟎𝟎

Add: load ( 1,000 x 5) 5,000

IP of closing stock 28,600

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Now lets check case (1) value of stock in hand is to be reduced by 10%.

Case (b) Market price of closing stock is expected to be Rs 19/unit due to fall in market demand.

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Rapid revision question 8: The account sales received from an agent disclosed that the total sales effected by him
during 2024-25 amounted to Rs 4,50,000. This included Rs 3,12,500 for sales made at invoice price which is cost
plus 25% and the balance at 10% above the invoice price. He incurred expenses to the tune of Rs 5,000 out of
which a sum of Rs 1,800 is recurring in nature. Forwarding expenses of the consignor totalled Rs 2,400. The
agent has remitted the balance due from him through bank draft after deducting the expenses. 5% commission
on gross sales, bad debts Rs 850 and bills payable accepted by him for Rs 10,000.

The value of unsold stock at original cost lying with the agent as on 31st March 2025 amounted to Rs 50,000.
You are required to prepare the consignment account and consignee account in the book of consignor.

Rough work:

Particulars Amount Particulars Amount

To, Goods sent on Consignment A/c ? By Consignee Account [Sale] 4,50,000

To Bank A/c ( Forwarding Expenses) 2,400 By Goods sent on Consignment [Load] ?
To, Consignee A/c : By Consignment Stock A/c ?
- Non-recurring Expenses 3,200
- Recurring Expenses 1,800
5,000

To Consignee A/c [Commission( 4,50,000 × 5%]

22,500
To consignee account: ( bad debts)
850
To stock reserve account ?
To profit and loss account: (profit ) ?

6,13,200 6,13,200

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Solution

In the book of consignor

Consignment account

Particulars Amount Particulars Amount

To, Goods sent on Consignment A/c 5,00,000 By Consignee Account [Sale] 4,50,000
To Bank A/c ( Forwarding Expenses) 2,400 By Goods sent on Consignment [Load] 1,00,000
To, Consignee A/c : By Consignment Stock A/c 63,200
- Non-recurring Expenses 3,200
- Recurring Expenses 1,800
5,000

To Consignee A/c [Commission( 4,50,000 × 5%]

22,500
To consignee account: ( bad debts)
850
To stock reserve account 12,500
To profit and loss account: (profit ) 69,950

6,13,200 6,13,200

Consignee account

Particulars Amount Particulars Amount

To consignment account (sales) 4,50,000 By bills receivable A/c 10,000
By consignment account(expenses) 5,000
By consignment account(commission) 22,500
By consignment account(bad debts) 850
By bank account (Bal fig) 4,11,650

Working notes 1: computation of IP of goods sent on consignment:

Cost of goods sold:

(
𝟑,𝟏𝟐,𝟓𝟎𝟎
x 100 ) + (
𝟏,𝟑𝟕,𝟓𝟎𝟎
x 100) 3,50,000
𝟏𝟐𝟓 𝟏𝟑𝟕.𝟓
50,000
Add: cost of closing stock
Total cost of goods sent on consignment 4,00,000

Add: Load ((
𝟒,𝟎𝟎,𝟎𝟎𝟎
x 25) 1,00,000
𝟏𝟎𝟎

IP of goods sent on consignment 5,00,000

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Working notes 2: Computation of value of closing stock:

Units Amount
Cost of goods sent on consignment 4,00,000
Add: Non-recurring expenses incurred by the consignor + 2,400
Add: Non-recurring expenses incurred by the consignee + 3,200
4,05,600

Value of closing stock ( cost) (

𝟒,𝟎𝟓,𝟔𝟎𝟎
x 50,000) 50,700
𝟒,𝟎𝟎,𝟎𝟎𝟎
𝟏
12,500
Add: load (50,000 x )
𝟒

Value of closing stock ( IP) 63,200

Alternatively , if question asks to prepare consignment debtors account in the book of consignor:

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Rapid revision Question 9: The account sales received from an agent disclosed that the sales made at 10% above
the price was 44% of the sales made at invoice price which is cost plus 25%. All the sales are made on credit basis.
He incurred expensesto the tune of Rs 5,000, out of which a sum of Rs 1,800 is recurring in nature. Forwarding
expenses of the consignor Rs 2,400. The agent had remitted the balance due from him through bank draft of Rs 4,11,650
after deducting the expenses, 5% commission on gross sales, bad debts Rs 850 and a bill payable accepted by him for Rs
10,000. The value of unsold stock at original cost lying with the agent amounted to Rs 50,000. You are required prepare
Consignment Account and the Agents’ Account in the books of the consignor.
For my knowledge:

Let cost 100

Invoice price 125 Let sales at IP = Y
Sales at 10% above IP 137.5 = .44Y

Solution: In the book of consignor:

Consignment account

Particulars Amount Particulars Amount

To, Goods sent on Consignment A/c ? By Consignee Account [Sale] ?

To Bank A/c (Forwarding Expenses) 2,400 By Goods sent on Consignment [Load] ?

To, Consignee A/c : By Consignment Stock A/c ?

(Original cost Rs 50,000)
- Non-recurring Expenses 3,200
- Recurring Expenses 1,800 5,000

To Consignee A/c [Commission)

?
To consignee account ( bad debts) 850
To stock reserve account ?

To profit and loss account (profit ) ?

Consignee account

Particulars Amount Particulars Amount

To consignment account (sales) ? By bills receivable A/c 10,000
By consignment account(expenses) 5,000
By consignment account(commission) ?
By consignment account(bad debts) 850
By bank account (Bal fig) 4,11,650

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Working notes 1: Computation of commission

Let gross sales = X

Commission = .05X

Gross sales = B/R + Expenses + commission + bad debts + remittances

X = 10,000 + 5,000 + .05X + 850 + 4,11,650

X = Rs 4,50,000

Gross sales = Rs 4,50,000

Commission = 4,50,000 x .05 = Rs 22,500

Working notes 2: Computation of sales at different prices:

Let sales made at IP = Y

Sales made at 10% above IP = .44Y

Y + .44Y = Gross sales

1.44 Y = 4,50,000
𝟒,𝟓𝟎,𝟎𝟎𝟎
Y (Sales at IP) = = Rs 3,12,500
𝟏.𝟒𝟒

Sales made at 10% above IP = 3,12,500 X .44 = Rs 1,37,500

Working notes 3: Computation of cost of goods sent on consignment:

Cost of goods sold on IP = (

𝟑,𝟏𝟐,𝟓𝟎𝟎
X 100) 2,50,000
𝟏𝟐𝟓
𝟏,𝟑𝟕,𝟓𝟎𝟎
Cost of goods sold at 10% above IP ( X 100) 1,00,000
𝟏𝟑𝟕.𝟓
Cost of closing stock 50,000
4,00,000

𝟒,𝟎𝟎,𝟎𝟎𝟎
Working notes 4: Computation of IP of goods sent on consignment: X 125 = 5,00,000
𝟏𝟎𝟎

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Rapid revision question 10: (CONVERSION OF CONSIGNMENT INTO JOINT VENTURE): Daga of
Kolkata sent to Lodha of Kanpur goods costing Rs 40,000 on consignment at a commission of 5% on gross sales.
The packaging and forwarding charges incurred by consignor amounted to Rs 4,000. The consignee paid freight
and carriage of Rs 1,000 at Kanpur. Three-fourth of the goods were sold for Rs 48,000. Then the consignee
remitted the amount due from him to consignor along with the account sale, but he desired to return the goods
still lying unsold with him as he was not agreeable to continue the arrangement of consignment. He was then
persuaded to continue on joint venture basis sharing profit or loss as Daga 3/5 th and Lodha 2/5th.

Daga then supplied another lot of goods of Rs 20,000 and Lodha sold out all the goods in his hand for Rs 50,000
(gross). Daga paid expenses Rs 2,000 and Lodha Rs 1,700 for the second lot of goods.

Show necessary ledger account in the books of both parties. No final settlement of balance due is yet made
Solution: In the books of Daga
Consignment account

Particulars Amount Particulars Amount

To, Goods Sent on Consignment A/c 40,000 By, Lodha’s A/c (sales) 48,000
To, Bank A/c (packing & dispatching) 4,000 By, Joint Venture with Lodha A/c 11,250
To, Lodha’s A/c: (stock transferred on conversion to JV)
Freight & Carriage 1,000
Commission 2,400
To, P & L A/c 11,850

59,250 59,250

Lodha account(As consignee)

Particulars Amount Particulars Amount

To, Consignment A/c - sales 48,000 By, Consignment A/c- expenses 1,000
By, Consignment A/c - commission 2,400
By, Cash/Bank A/c 44,600
48,000 48,000

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For accounting Joint venture Business:

Joint venture with Lodha account

Particulars Amount Particulars Amount

To, Consignment to Lodha A/c 11,250 By, Balance c/d 42,280
To, Goods/purchases A/c 20,000
To, Bank A/c - expenses 2,000
To, P & L A/c (profit) 9,030

42,280 42,280

In the book of Lodha

Daga account ( Consignor)

Particulars Amount Particulars Amount

To, Cash A/c- expenses 1,000 By, Bank A/c – sales 48,000
To, Commission A/c 2,400
To, Bank A/c - remittance 44,600
48,000 48,000

For accounting Joint venture Business:

Joint venture with Daga account

Particulars Amount Particulars Amount

To, Cash A/c - expenses 1,700 By, Bank A/c – sales 50,000

To, P & L A/c (profit) 6,020

To, Balance c/d 42,280

50,000 50,000

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Memorandum joint venture account

Particulars Amount Particulars Amount

To, Daga A/c - goods 11,250 By, Lodha A/c – sales 50,000

To, Daga A/c- goods 20,000

To, Daga A/c- expenses 2,000

To, Lodha A/c- expenses 1,700

To, Net Profit : 9,030

Daga 3/5th Share 6,020

Lodha 2/5th share

50,000 50,000

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Rapid revision question 11 (must try yourself): Mr. P consigned goods to Mr. D, his agent at Dhanbad, at cost
price of Rs 40,000. Mr. P’s accountant at the end of the year drew up the agent account as below:

Particulars Amount Particulars Amount

To, Goods 40,000 By, Cash 25,000
To, Cash-Freight 3,000 By, Balance 19,300
To, P/L A/c 1,300
44,300 44,300

Mr. D sold part of the goods for Rs 45,000, which exceeded by Rs 9,000 their invoice value. He collected
Rs 38,000 after allowing discount of Rs 2,000 to customers. Bad Debts came to Rs 1,000 and his expenses to Rs
800 (including Rs 200 for loading and cartage). Mr. D was entitled to a 5% commission on cash collected. From the
above information draw up Consignment A/c, Consignment Debtors A/c and Mr. D A/c in the books of Mr. P.

Solution: Consignment account

Particulars Amount Particulars Amount

To goods sent on consignment 40,000 By consignment debtor (sales) 45,000
To bank account (freight) 3,000
To consignment debtor (discount) 2,000 By stock on consignment 4,320
To consignment debtor (bad debts) 1,000
To D’s account (expenses) 800
To D’s account (commission) 1,900
To profit and loss account ( profit) 620

Consignment debtors account

Particulars Amount Particulars Amount

To Consignment account (sales) 45,000 By Consignment account(discount) 2,000
By Consignment account(bad debts) 1,000
By D’s account (collection) 38,000
By balance c/d 4,000
45,000 45,000

D’s account

Particulars Amount Particulars Amount

To Consignment debtors 38,000 By Consignment account(expense) 800
By Consignment account(commission) 1,900
By bank account 25,000
By balance c/d 10,300
38,000 38,000

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Working notes 1: Computation of purchase price of unsold stock = 40,000 – ( 45,000-9,000) = Rs 4,000

Working notes 2: computation of value of closing stock:

Units Amount
Cost of goods sent on consignment 40,000
Add : Non-recurring expenses incurred by the consignor 3,000
Add : Non-recurring expenses incurred by the consignee 200

43,200

Value of closing stock (

𝟒𝟑,𝟐𝟎𝟎
x 4,000) 4,320
𝟒𝟎,𝟎𝟎𝟎

Rapid revision question 12. FILL IN THE BLANKS (Important for MCQ):
i. Three parties are involved in a consignment business – Consignor, Consignee and …………

ii. Consignment business requires certain specific documents for its operations. These documents are
‘…………’ and ‘………..’
iii. ……….. document acts as evidence of despatch of goods from the end of the consignor.

iv. ………….. is a post-sales document that formally conveys the developments of the consignment business
at the consignee’splace to the consignor.

v. ……… are incurred only once and are generally incurred prior to reaching the consignee’s premises.

vi. ……………… is a special type of transaction in which one entity sends goods to another entity for selling
the goods of the former for a pre-determined commission.

vii. ……………. of goods refers to those losses which are avoidable in nature.

viii. ……………..a commission that is payable for taking the risk associated with credit sale of the goods

ix. …………… are the expenses which are incurred on more than one occasion.

x. ……………… is also referred to as Special Commission.

xi. The consignee may open a special account called the ………to record the movement of the goods.

Answer:

i- Buyer. ii. Proforma Invoice, iii. Performa invoice iv. Account Sales
Account Sales
v. Non-recurring vi. Consignment vii. Abnormal Loss viii. Del-credere Commission
expenses
ix. Recurring expenses x. Over-riding Commission xi. Consignment
Inward Account

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Rapid revision question 13. MULTIPLE CHOICE QUESTIONS:

1. Which class of account is Consignment Account?

(a) Personal Account

(b) Real Account
(c) Representative Personal Account
(d) Nominal Account
2. The balance in consignment account shows .

(a) Amount receivable from consignee

(b) Amount payable to consignee
(c) Profit/ loss on consignment
(d) Closing stock with consignee
3. Which of the following commission is allowed by the consignor to the consignee to encourage the
consignee for putting-up hard work in introducing new product in the market?

(a) Del-credere Commission

(b) Over-riding Commission
(c) Hard work Commission
(d) Ordinary Commission

4. On receipt of goods, the consignee debits which of these accounts:

(a) Purchase account

(b) Goods account
(c) Consignors account
(d) None of these

5. Goods of the invoice value of Rs. 2,40,000 sent out to consignee at 20% profit on cost. The loading amount will be:

(a) Rs. 40,000

(b) Rs. 48,000

(c) Rs. 50,000

(d) None

6. Goods sent on consignment account is of the nature of:

(a) Personal account (b) Nominal account

(c) Real account (d) Sales account

7. The consignment accounting is made on the following basis:

(a) Accrual Basis

(b) Realization basis
(c) Cash basis
(d) All of above

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8. X of Kanpur sends out 1,000 boxes to Y Delhi costing Rs. 200 each at an invoice price of Rs. 220 each.
Goods sent out on consignment to be credited in general trading will be:

(a) Rs. 2,00,000

(b) Rs. 2,40,000

(c) Rs. 40,000

(d) None

9. X of Mumbai sends out certain goods at cost +25%. Invoice value of the goods is Rs.2,00,000. 4/5th of
the goods were sold by consignee at Rs.1,76,000. Commission 2% upto invoice value and 10% of any
surplus above invoice. The amount of commission will be.

(a) 4800
(b) 5200

(c) 3200

(d) 1600

10. Mr. X consigned goods costing Rs. 3,00,000 to Mr. Y at cost + 33 1/3%. 1/10 of the goods were lost in
transit. Mr. Y sold 3/5th of the remaining goods at 10% above the invoice price. Calculate the amount of sales:

(a) 2,00,000

(b) 2,37,600

(c) 1,80,000

(d) 4,00,000

11. X sends out goods costing 2,00,000 to Y at 50% above cost price. The goods are sold for 4,00,000.
Commission is payable @ 10% on sales plus 20% of the excess of sales over invoice price. The amount of
commission will be:

(a) 50,667 (b) 50,800 (c) 60,000 (d) 50,600

12. Goods sent on consignment for Rs.50,000. During transit 1/10 th of goods were destroyed by fire. Again
1/9th of goods received by consignee were destroyed by fire in godown. Half of the original goods were sold
for 30,000. Freight & insurance paid by consignor 2,500 and 1500 respectively. Calculate closing Stock.

(a) 30200 (b) 21,600 (c) 20,000 (d) 16,200

13. X of Kolkata sends out 2,000 boxes to Y of Delhi costing Rs 100 each. Consignor's expenses Rs 5,000.
1/10th of the boxes were lost in consignee's godown and treated as normal loss.1200 boxes were sold by
consignee. The value of consignment stock will be:

(a) Rs. 68,333 (b) Rs.61,500 (c) Rs.60,000 (d)Rs.60,250

14. Goods costing Rs 1,80,000 sent out to consignee to show a profit of 20% on Invoice Price. Invoice price
of the goods will be:

(a) Rs.2,16,000 (b) Rs.2,25,000 (c) Rs.2,10,000 (d) None

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15. Goods of the Invoice value Rs 2,40,000 sent out to consignee at 20% profit on cost. The loading amount
will be:

(a) Rs.40,000 (b) Rs.48,000 (c) Rs.50,000 (d)None

16. X sent out certain goods to Y of Delhi at 20% profit on cost. 1 /10th of the goods were lost in transit. Invoice
value of goods lost Rs 12,500. Invoice value of goods sent out on consignment will be:

(a) Rs.120,000 (b) Rs. 125,000 (c) Rs.140,000 (d)Rs.l00,000

17. deleted

18. X of Kolkata sends out goods costing Rs 1,00,000 to Y of Delhi. 3/5th of the goods were sold by consignee
for Rs 70,000. Commission 2% on sales plus 20% of gross sales less all commission exceeds cost price. The
amount of Commission will be:

(a).2833 (b) Rs.2900 (c) Rs.3000 (d) Rs.2800

19. X of Kolkata sends out goods costing 300,000 to Y of Mumbai at cost + 25%. Consignor's expenses Rs
5000. 1/10 of the goods were lost in transit. Insurance claim received Rs 3,000. The net loss on account of
abnormal loss is:

(a) Rs.27,500 (b) Rs.25,500 (c) Rs.30,500 (d) Rs.27,000

20. X of Kolkata sends out certain goods at cost + 25%. Invoice value of goods sends out Rs 400,000. 4/5th of
the goods were sold by consignee at Rs. 3,52,000. Commission 2% upto invoice value and 10% of any surplus
above invoice value. The amount of commission will be:

(a) Rs.9,600 (b) Rs.10,400 (c) Rs.6,400 (d)Rs. 3,200

21. A of Mumbai sold goods to B of Delhi, the goods are to be sold at 125% of cost which is invoice price.
Commission 10% on sales at IP and 25% of any surplus realized above IP. 10% of the goods sent out on
consignment, invoice value of which is Rs 12,500 were destroyed. 75% of the total consignment is sold by B at Rs
1,00,000. What will be the amount of commission payable to B?

(a) Rs.10,937.5 (b) Rs. 10,000 (c) Rs.9000 (d)Rs.9700

22. Goods sent out on consignment Rs 2,00,000. Consignor's expenses 5,000. Consignee's expenses 2000. Cash
sales Rs 1,00,000, credit sales Rs 1,10,000. Consignment stock Rs 40,000. Ordinary commission payable to
consignee Rs 3,000. Del-credere commission Rs 2000. The amount irrecoverable from customer Rs 2,000. What
will be the profit on consignment?

(a) Rs.38,000 (b) Rs.40,000 (c) Rs.36,000 (d) Rs.43000

23. Ram of Kolkata sends out goods costing 100,000 to Y of Mumbai at 20% profit on invoice price. 1/10 th of
the goods were lost in transit. ½ of the balance goods were sold. The amount of stock reserve on consignment
stock will be:

(a) Rs.4,500 (b) Rs.9,000 (c) Rs.11,250 (d)None

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Answer:

1-d 2-c 3-b 4-d 5-a 6-b 7-a 8-a 9-a 10-b
11-c 12-d 13-a 14-b 15-a 16-b 17-a 18-a 19-a 20-a
21-a 22-a 23-c

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