Consignment Account
Meaning
a. A
consignment is the dispatch of goods by its owner to his agent for the purpose
of selling.
b.
The former is called the 'Principal' or 'Consignor' and
c.
The latter is called 'Agent' or 'Consignee'.
d.
The goods so dispatched or sent by
the consignor is regarded as 'Consignment Outward' in the books
of consignor, whereas
e.
The goods so received by the consignee is treated as 'Consignment
Inward' in his books.
Difference
between sale and consignment
a.
In sale
ownership transferred where consignment is it not.
b.
In sale
purchaser can dispose OFF goods as per desire as he is the owner now but in consignment
he cannot as the ownership is not transferred.
c.
Damage risk
borne by owner may it be seller and after sale its purchaser but in consignment
only consignor bear the loss.
d.
Return
policy work in case of consignment but not mandate after a sale.
Commission
payable to consignee
a. Ordinary and
b. Del-Credere.
Normal loss
If some loss
is unavoidable (e.g, leakage) it would be spread over the entire
consignment while valuing stock. The total cost plus expenses incurred should
be divided by the quantity available after the normal loss to ascertain the
cost per unit.
Abnormal
loss
If any accidental
or unnecessary loss occurs then such loss is ascertained and transferred to
the profit and loss account.
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