CONSIGNMENTS
ACC 106
Consignment
Sometimes, it is economical for manufacturer or
wholesaler to appoint agents to sell goods on behalf
Despatch of goods from
one person to another
person fort the purpose of of selling is termed as
consignment
Goods so sent are termed as goods sent on
consignment
The sender is called consignor and the recipient
consignee
Goods sent to agents remain property of the sending
firm, not the agents.
Main features of
consignment
Remuneration to Consignee
A commission is paid to the consignee for
selling goods on behalf of the consignor
If the consignee guarantees collection of all
trade debts, additional commission called
del credere commission is paid
Periodically the consignee sends an
account sale (not an Account real but it is
a statement) to consignor showing sales
made, expenses paid, commission due and
amount remitted or remittable to consignor
Particulars
40 cases of radio
10 radio
Less: Expenses &Charges:
Carriage
700
Custom duty
2000
Insurance
1300
Selling expenses
500
Less: Commission @5% of sales
Rate
1,200
1,100
Shs
Shs
48,000
11.000
59,000
4,500
2,950
7,450
51,550
Signature
Date
20,000
31,550
Important terms
Proforma Invoice: a statement prepared by the
consignor stating the quantity, quality, and price
of goods.
Direct expenses: All expenses till the goods
reach the godown of consignee.
Non recurring nature and increase value of
goods. E.g. freight, carriage, insurance, loading
and unloading charges
Consignors(the traders)
Records
Consignor usually maintains three
accounts:
Consignment Account
Consignee Account
Goods sent on Consignment account
Consignors(the traders)
Records
Example
Paul of Mwanza, whose financial year ends on
31 December, consigned goods to Anneth, his
agent in Mombasa. All transactions were
started and completed in 2013.
(i) January 15: Paul consigned goods costing
Shs 1,000,000
(ii) February 27: Paul paid carriage to Mombas
Shs 100000
Pauls Books
Consignment to Angel, Mombasa, Kenya2013
2013
Shs
Jan15
Feb28
Bank: carriage
Jul 31
Anneth:
2013
1,000 Jul31
Sales
1,500,
100
Import duty
50
Distribution
60
Commission
90
Profit on consignment
(transferred to P&L)
Shs
200
1500
1500
1000
Bank
2013
Jul31
Shs 2013
Angel
Feb2
(consignee) 1300 8
Shs
Consignment
to Angel:
carriage
100
2013
Jul31 Sales
Angel (Consignee)
Shs 2013
1500 Jul31 Consignment
Import duty
Distribution
Commission
Bank
1500
Shs
50
60
90
1300
1500
Angels(Consignee)
books
Account of Sales(converted in Tshs)
Angel,
Mombasa,
Kenya.
31 Jul 2013
To
Paul
Mwanza
Sales of goods received on consignment
Less charges: Import duty
Distribution costs
Commission
Bank draft enclosed
300
1,500
50
30
90
200
1,
Paul (Consignor)
2013
Shs 2013
Jul31 Bank:
Import duty
Distribution
Commission
transferred to
P& L
Bank
Jul31
50
Shs
Bank:
Sales
1500
60
90
1300
1500
1500
Bank
2013
Jul31 Paul: Sales
Shs 2013
Shs
50
Paul: Distribution
60
1300
Illustration
Paul consigns 100 radio to Anne. Each radio costs shs 800.
Paul pays the following expenses: Freight 1000, Insurance
400, Carriage 500.
Anne pays the following expenses: Custom duty 2000,
unloading charges 500, godown rent 500, salary to
salesman 500.
Goods reach the godown of consignee.
At the end of the year, 25 radio remained unsold with Anne.
The market value of each radio is 850.
Shs
Cost of 25 radios@800
Shs
20,000
250
Insurance
100
Carriage
125
Unloading Charges
Custom duty
500
1,100
21,100
Normal Loss
The loss is due to inherent characteristics of
goods. E.g. shrinkage, evaporation, leakage
and pilferage
Such losses form part of cost of goods and no
additional adjustment is required for this
purpose
Quantity of such loss is to be deducted from
the total quantity sent by the consignor.
Illustration
Angel consigned 2,000 tones of coal @ shs 50 per
tone Boni.
She paid shs 20,000 as freight.
Due to normal wastage only 1950 tones were
received by Boni.
Boni paid shs 5000 as unloading and carriage
charges.
The goods unsold amount to 650 tones
Your required to calculate the value of unsold stock
Solution
Shs
Cost price of 2000 tonnes of coal @ shs 50 per tone
100,000
20,000
5,000
Total cost
125,00
Abnormal Loss
Loss occurs on account of reasons which are
accidental, or which rarely happened.
They are like theft, riots, accidents, fire,
earthquake etc
Losses could occur in transit or in consignee's
store and solely to be borne by consignor.