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Nature of Consignment

A trader sends goods to an agent to sell for him. These goods are sent on consignment.
The ownership of goods still belongs to the trader, therefore all profits on consignment
belongs to the trader. The agent earns commissions, he is NOT the owner, he is only the

Consignment Terms

Consignor: The trader who sends goods to the agent to sell for him.
Consignee: The agent who receives the goods.
Account Sales: The statement prepared by the agent (consignee) to tell the trader
(consignor), how much goods he sold. (source document to trader)
Commissions: Salary earned by the agent (consignee) if he can sell goods.
Commissions are calculated on gross proceeds of sales.
Del Credere
Commission: Additional commissions earned by the agent (consignee) if the agent if
the bears the responsibility of bad debts occurred. (Note: If there is bad
debt, a del credere commission cannot be received by the consignee).
Invoice : A detailed invoice that informs the consignee on the description of
goods and the minimum selling price for the goods. This invoice does
not charge the consignee.


The primary object for preparing the consignment account is to find the profit/loss on
each consignment separately. For that the consignor prepares four (4) basic records:

1. Goods Sent On Consignment Account

2. Individual Consignment Outwards Account
3. Individual Consignee Personal Accounts
4. Profit & Loss on Consignment Account

1: Personal consignment accounts for each consignee/Goods sent on Consignment to

distinguish one consignment from another. This account is credited with the original cost
of the goods.
Goods sent on Consignment
Date Consignment Outwards to
(name of consignee goes here)
(cost of goods goes here)

2: Consignment outwards is a combined trading and profit and loss account relating
solely to consignment.
Consignment Outwards to Consignee
Date (cost of goods goes here) Date Gross proceeds of Sales
all expense of the consignor (from account sales)
all expense of the consignee Stock (stock on hand to be
profit on consignment calculated)
(transferred to the trading a/c)

2a) Stock on hand – It is not necessary that all consignment should be completed during
the current year. If all consignment is not sold a value should assigned to it. This
calculation does NOT include selling expenses or commissions.

Original cost + consignors expenses + consignees expenses (except selling exp. &
commissions) = Total value/Total cost.

Value of unsold stock = unsold quantity x total value

total quantity

2b) Calculation of expenses – If all of the stock is not sold it is also necessary to
allocate/spread out the cost of expense for the goods sold.

Expense for profit & loss = consignors expenses + consignees expenses (except selling
exp. & commissions) = Total expense

Expense for profit & loss = amount sold x total expense

amount consigned

3) Individual account of Consignees – These are opened for each agent and are debited
with sales made, and credited with the consignee’s expenses and commissions.
Consignee Account
Date Sales Date all expense of the consignee only
(no unsold stock) (no expenses of the consignor)
4) Profit and Loss on Consignment – This account is also a comprehensive account and
contains profits made on all consignments carried out during the trading period. The total
of this is transferred to the profit and loss account at the end of the year.

Profit and loss on consignment

Date Consignment - R.Rolly
(this amount is transferred from the
consignment outwards account)


The consignee’s records are less involved and because he does not have to keep record of
stock except by way of memorandum. The consignee records include:

1. Account Sales (source document for consignor)

2. Consignment Inwards Account
3. Debtors Account
4. Bad Debts Account
5. Commissions Received Account

1. Account Sales – to show the consignor amount of sales, all expenses paid for on
consignment, and commission deducted. This will show how much money the
consignee is remitting/sending to the consignor.

Account Sales
Consignee Name
Consignment of goods sold on behalf LAD Limited, Andros $
Sales: 300 cases @ $15 each 4500
Landing charges 580
Selling expenses 120 700
Commission at 5% on $4500 225
Del Credere Commission at 2% on $4500 90 315
Remittance/Bank draft/Cheque 3485

2. Consignment Inwards Account – to record the amount of consignment received.

Consignment Inwards from LAD Limited
Date all expense of the consignee Date Cash Sales
all commisions go here Debtors (credit sales)
balance c/d

3. Debtors Account – to record the consigned goods that was sold on credit.

Debtors Account
Date Goods Date Cash received
Balance c/d

4. Bad Debts Account – to record the amount of consigned good that is


Bad Debt Account

Date Debtor Date

5. Commissioned Received Account – to record all commissions received from


Commissions Received Account

Date Date LAD Limited Commission
Del credere

Consignment Account Worksheet

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question. (1 mark each)
1. Kelly Jones, San Salvador, consigned goods originally costing $6 000 to Shelly Holmes
in Nassau. Shelly paid and additional $250 for trucking, $180 insurance and $120
landing charges. There were 160 items in total. (BGCSE 2002)

What is the total value of the goods consigned?

A. $6 000
B. $6 370
C. $6 430
D. $6 550

1b. If 40 items remain unsold, what would be the value of Kelly’s stock on hand?
(BGCSE 2002)

A. $1 500.50
B. $1 592.50
C. $1 607.50
D. $1 637.50

2. A Consignee does not have to keep a stock record for goods consigned, except for
memorandum purposes. Why is it not necessary for him to keep a record of stock?
(BGCSE 2003)

A. The Consignee has sufficient details in the Account Sales

B. The Consignee is only an agent and does not own the goods
C. The Consignee must sell all goods in his possession
D. The Consignee owes the Consignor for unsold stock

3. When preparing Consignment accounts, the agent usually receives remuneration

(payment) for services in the form of a flat rate based on a percentage of the gross sales
figure. What is this flat rate called? (BGCSE 2003)

A. Commission
B. Consignment commission
C. Del credere commission
D. Proforma commission

4. Which of the following statements correctly defines DEL CREDERE COMMISSION?

(BGCSE 2004)

A. Additional payment to the consignee over and above regular commission

B. Document sent by the consignee to the consignor giving details of the sales
C. remuneration for services performed by the consignee as a commission
D. When goods are sent to an agent as commission

5. Which of the following is correct: (BGCSE 2005)

A. The Consignor is the person who owns the goods and sends them to the agent
B. The Consignor is the person who receives and sells the goods
C. The Consignor is the person who receives the a del credere commission
D. The Consignor is the agent who sells the goods

6. P. Taylor, a consignee, submitted an Account Sales to Terry’s Wholesalers, a consignor,

showing that he had sales of 300 items at $25 each, Landing Charges $680, Duties and
Taxes $1 200 and a 5% commission. How much should be indicated as the amount due
to Terry’s Wholesalers? (BGCSE 2005)

A. $5 245
B. $5 620
C. $7 125
D. $7 500

7. P. Lowe ships goods $1 200, from New Providence on consignment to B. Dean in Long
Island. Which entry should be made in the books of P. Lowe? (BGCSE May 2006)

A. Goods Consigned Outwards Consignment to B. Dean, Long Island
B. Consignment to B. Dean, Long Island Goods Consigned Outwards
C. Goods Consigned Inwards Consignment to B. Dean, Long Island
D. Consignment to B. Dean, Long Island Goods Consigned Inwards

Question 8 to 11 refer to the following (BGCSE May 1997)

Peter Rollins of Bimini consigned 125 cases of fish to Charles Wells in Long Island on 1st
February 1997. Charles Wells is entitled to a commission of 5% on sales and an additional del
credere commission of 2% on sales. The goods cost Peter Rollins $25 a case and he paid $80 in
freight charges and insurance premiums of $30.


BGCSE 2002)
BGCSE May 2002
BGCSE June 2007
BGCSE June 2009

C. Prepare the accounts necessary to record these details in the books of the
consignor. [16]