CONSIGNMENT ACCOUNT

Consignment of goods is the sending of goods by the consignor to the

consignee (the agent) who agrees to sell them on behalf of the owner
(consignor).

Characteristics of Consignment Account

1. Ownership remains with the owner (consignor).
2. The consignor is the owner
3. The consignee is the agent
4. The consignee can indemnify (secure) the consignor against
losses.
5. Goods on consignment are not sold to the agent.

Definitions of Terms in Consignment Accounts

Consignor: This is the person who forwards or sends goods to an
agent in order to collect and sell them on his or her behalf on
commission basis. The owner retains ownership of the goods on
consignment.
Consignee: This is an agent to whom goods is forwarded to, in order to
sell them on behalf of the principal on commission basis. The consignee
has no title to the goods consigned to him.
Commission: This is the remuneration given to the consignee for
selling the goods and it is usually expressed as a percentage on the
value of sales.
Del-Credere Commission: This is the extra commission given to the
agent for indemnify the principal against bad debts or losses.
Proforma Invoice: This is the invoice sent to the customer who is
required to pay for goods before they are delivered to him. Proforma

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invoice is used when the supplier is not sure of the customer’s credit
worthiness. It shows the nature of the goods, quantity, weight,
measurement and prices etc.
Differences between consignment and sales.
Consignment Sales
1. Receiver of the goods is the agent Receiver of the goods is a debtor
(buyer)
2. Ownership remains with the sender Ownership passes to the person
and owner (consignor) (buyer).
3. Goods can be returned if they are Goods sold are not returnable
not sold except for some special reasons.

Expenses on Consignment: Some expenses in these accounts are:

carriage, freight, rent, marine insurance, fire insurance, dock expenses
selling expenses.
Account Sales: This is a document showing the value of goods sold by
the consignee including all expenses and charges incurred.

Illustration I
Alhaji Musa is a manufacturer of earrings based in Senegal, due to the
high demand of his products in Kano, Nigeria, he appointed an agent
called Madam Aisha to whom he consigns earrings for sales in Kano. He
has just consigned the products valued N10,000,000 with the
arrangement that Madam Aisha will enjoy a commission of 5% on sales.
It was agreed that Madam Aisha is to settle the forwarding bills of
N500,000 and that all the items would be sold for N15,000,000 and cash
received for payment.
Required Make the necessary entries in the books of the consignor.

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Solution I

BOOKS OF THE CONSIGNOR

ALHAJI MUSA

Consignment (outward) A/C

N N
Goodson consignment 10,000,000 Sales (consignee) 15,000,000
Consignee bills 500,000
Consignee Comm. 750,000
Profit & loss 3,750,000
15,000,000 15,000,000

Goods on consignment A/C

N N
Consignment trading 10,000,000 Consignment 10,000,000

Consignee Account
N N
Consignment: Sales 15,000,000 Consignment (bills) 500,000
Consignment(comm) 750,000
Cash 13,750,000
15,000,000 15,000,000

Cash Account
N N
Consignee 13,750,000

Illustration II

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 AGY Stationaries and Co. Ltd was appointed as agent by Halibiz Ltd a
paper milling company for the marketing of its products. AGY
Stationaries & Co. Ltd received consignments of goods from the
consignor valued at N176, 000,000. The terms of the agency:
(a) The consignee will be entitled to 8% commission on sales
(b) It will be entitled to 3% del credere commission on credit
transactions
(c) The consignee is to pay :
(i) Customs duties N12,500,000
(ii) Carriages N5,000,000
(iii) Burglary insurance N10,000,000
Additional information:
(d) The consignee sent N48, 000,000 to the consignor as advance.
(e) It sold part of the consignment to Apex & Co Ltd N80, 000,000 on
credit.
(f) It sold goods worth N90, 000,000 for cash
(g) It took goods worth N40, 000,000 for personal use.
(h) The stock remaining unsold was N30, 000,000 after sending and
sight draft for the balance.

Required:
(A ) Make the necessary entries in the books of the consignor
(B ) make the necessary entries in the books of the consignee.

SOLUTION II
The books of Halibiz Ltd (consignor)
Consignment Account (Outwards)
N N
Goods on consignment 176,000,000 Apex Ltd 80,000,000
Consignee :custom 12,500,000 Cash sales 90,000,000
duties
Consignee: carriages 5,000,000 Drawings 40,000,000
Consignee :burglary Stock c/d 30,000,000
Insurance 10,000,000

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Consignee:commission 16,800,000
Consignee:Del credere 2,400,000
Profit c/d 17,300,000
240,000,00 240,000,000
0
Stock: balance b/d 30,000,000 Goods: consign. 30,000,000

WORKINGS
Total sales = 80,000,000+90,000,000+40,000,000=210,000,000
Commission 210,000,000x8%=16,800,000
Del credere comm.=3%of N80,000,000=2,400,000

Goods on Consignment Account

N N
Consignment 176,000,000 Consignment b/d 176,000,000
trading

Consignee Account
Apex Ltd 80,000,000 Customs duties 12,500,000
Cash sales 90,000,000 Carriages 5,000,000
Drawings 40,000,000 Burglary 10,000,000
insurance
Commission 16,800,000
(8%)
Delcredere(3%) 2,400,000
Cash(advance ) 48,000,000
Cash(balance ) 115,300,000
210,000,000 210,000,000

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 Cash Account
N N
Consignee (advance) 48,000,000
Consignee (balance) 115,300,000

BOOKS OF AGY & LTD (CONSIGNEE)

Consignment Account (Inward)

N N
Consignor 176,000,000 Apex ltd 80,000,000
Cash-customs duties 12,500,000 Cash sales 90,000,000
Cash- carriages 5,000,000 Drawings 40,000,000
Cash -burglary 10,000,000 Stock c/d 30,000,000
Commission
Agency 16,800,000
Del credere 2,400,000
222,700,000
Consignor (profit) 17,300,000
240,000,000 240,000,000
Stock: bal b/d 30,000,000 Consignor: 30,000,000
returned

Consignors Account
N N
Cash (advance ) 48,000,000 Consignment 176,000,000
Consignment(stock 30,000,000 Consignmentprof 17,300,000
) it
Cash (balance) 115,300,000
193,300,00 193,300,00

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 0 0

Cash Account
N N
Consignment:cash 90,000,000 Customs Duties 12,500,000
sales
Carriages 5,000,000
Burglary 10,000,000
Advance 48,000,000
Cash (balance) 115,300,000

Apex Ltd Account

N N
Consignment 80,000,000

Drawings Account
N N
Consignment 40,000,000

Commission Received Account

N N
Agency (Commission) 16,800,000
Del credere (Commission) 2,400,000

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