CONSIGNMENT ACCOUNTS Unit 1 Second Sem BCom 21-22GFGC GBD

 



Module: 1 - CONSIGNMENT ACCOUNTS 14 Hrs Consignment - Introduction & Meaning; Consignor & Consignee; Goods Invoiced at Cost Price; Goods Invoiced at Selling Price; Normal Loss & Abnormal Loss; Valuation of Stock; Stock Reserve; Journal Entries & Ledger Accounts in the books of Consignor and Consignee 


What is Consignment Accounting?

Consignment accounting is a type of business arrangement in which one person sends goods to another person for sale on his behalf, and the person who sends goods is called the consignor. Another person who receives the goods is called the consignee; where the consignee sells the goods on behalf of the consignor on consideration of a certain percentage on sale.

 

Explanation

In Consignment, goods are left in the hands of an authorized third party called the consignee for sale on behalf of the consignor. Ownership of goods remains in the hands of the consignor. The agreement made between the consignor and consignee is for a smooth flow of transactions, with a clear understanding of the terms and conditions. Typical products sold through consignment include clothing, shoes, furniture, toys, music & other instruments, etc.



  1. Two Parties: Consignment accounting mainly involves two parties, the consignor and consignee.
  2. Transfer of Procession: Procession of goods transferred from consignor to consignee.
  3. Agreement: There is a pre-agreement between the consignor and consignee for the terms and conditions of the consignment.
  4. No Transfer of Ownership: The ownership of goods remains in the hands of the consignor until the consignee sells them. The only procession of goods is transferred to a consignee.
  5. Re-Conciliation: At the end of the year or periodic intervals consignor sends a Pro-forma invoice while the consignee sends account sale details, and both reconcile their accounts.
  6. Separate Accounting: There is independent accounting done of the consignment account in the books of the consignor and consignee. Both prepare consignment accounts and record the journal entries of goods through consignment accounts only.

Terms Used in Consignment Accounts

The following terms are used in consignment accounting:

Terms used in CA

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  1. Consignor: It is the person that sends goods.
  2. Consignee: The person who receives the goods is called the consignee.
  3. Consignment: Consignment is a business arrangement through which the consignor sends goods to the consignee for sale.
  4. Consignment Agreement: It is a legally written communication between the consignor and consignee, which defines the terms and conditions of the consignment.
  5. Pro-Forma Invoice: When the consignor sends goods to the consignee, he also forwards statements showing details of goods such as quantity, price, etc., and that statement is called the Pro-forma invoice.
  6. Non-Recurring Expenses: Expenses that the consignor incurs to dispatch the goods from his place to the consignee’s place are called non-recurring expenses. These expenses are added to the cost of goods.
  7. Recurring Expenses: The consignee incurs these expenses after the goods reach his place. These expenses are maintenance of goods type expenses.
  8. Commission: Commission is the reward/ consideration for the sale of goods on behalf of the consignor. It is as per the consignment agreement.
  9. Account Sale: It is the statement forwarded by the consignee to the consignor showing details of goods sold, amounts received, expenses incurred, a commission charged, advance payment and balance due and stock in hand, etc.

 

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Placement Incubation

Prepare the accounting Equations for the following transactions 31.08.2023

  1.Prepare Accounting Equation for the following transactions: Date: April 1, 2022 Mr. A introduced INR 5,00,000as capital into the business.  Date: April 5, 2022 Purchased inventory for cash: INR 20,000. ```  Date: April 10, 2022 Made sales for cash: INR 15,000. ```  Date: April 12, 2022 Purchased inventory on credit: INR 12,000. ```  Date: April 15, 2022 Made sales on credit: INR 18,000.  Date: April 18, 2022 Returned some defective inventory for cash: INR 2,000.  Date: April 20, 2022 Accepted returned goods from a customer: INR 3,500.  Date: April 25, 2022 Paid wages to employees: INR 8,000.  Date: April 28, 2022 Paid salaries to employees: INR 15,000.  Date: April 30, 2022 Charged depreciation on machinery for the month: INR 1,500. 2.Prepare Accounting Equation for the following transactions: Date: April 1, 2022 Mr. A introduced INR 4,50,000 as capital into the business.  Date: April 5, 2022 Purchased inventory for cash: INR 1,20,000. ```  Date: April 10, 2022 Made sales for cash
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AFA test question Paper to be held on 23rd July 2023 at 9 am.

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                          Question Paper Pattern for the AFA test. Total for 20 marks                                                  Section A     2*2=4                                    Answer any two question out of 4 questions.                   Questions are asked from Consignment accounts and Royalty accounts.                                                              Section B     2*8=16                                      Answer any two questions out of 3 questions.         Questions are asked from Consignment accounts and Royalty accounts and Conversion of Firm                                                                    into a Ltd Company.   What is co nsiQgnment accounting? What is the difference between consignor and consignee? What are What is consignment accounting? What is the difference between consignor and consignee?  What are the features of consignment accounting?  What are the accounting entries made in consignment accounting?  What is account sale in
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AFA Test question Paper on 23rd July 2023 at 9 am.

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  Note: Good Morning all dear students. Copy only questions in the Blue Book. Write details on your blue book. Before answering in your blue book at 9 am getting my signature is mandatory, otherwise your answer booklet will not be valued. Malpractice is completely prohibited.  Suresh Babu MG        GOVERNMENT FIRST GRADE COLLEGE                                                GAURIBIDANUR 561208                                SUB: ADVANCED FINANCIAL ACCOUNTING                                                                                                                    DATE: 23.07.2023                                                                                                                      TIME: 9AM TO 10.50 AM                                                                                                                                                  Total Marks 20                     Section A     2*2=4                                    1.  Answer any TWO out of FOU
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