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Accounting treatment

harini (student) (59 Points)

24 November 2009

How to account for

1. consignment sales

2. stock transfer to branch

3. ESOP

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11 Replies

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 25 November 2009

Consignment Sale - Since consignor remains the legal owner of the goods sent on consignment, consignee should not be debited until he informs the consignor of having made the sale. So entry at the time of sending goods would be as follows at cost price.

Consignment A/c Dr.

To Goods Sent on Consignment

Goods Sent on Consignment A/c Dr.

To Purchase A/c or Trading A/c

For transferring goods to branch office the entry will be at cost price (though entry can be made at invoice price, then a reverse entry will be passed for the profit element called load). The same treatment could be given in case of consignment a/c also.

Branch A/c Dr.

To Goods Sent to Branch A/c

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pravanjan mishra (Accountant) (53 Points)
Replied 25 November 2009

Am agree with Mr Sharma

CA. Rishabh Mittal (CA in Practice) (1077 Points)
Replied 25 November 2009

CONSIGNMENT - It is to be noted that legal owner to goods is consignor only. Therefore, he'll maintain seperate account for consignment (Just like seperate trading & P/L account for consignment related goods).

1. On goods transff. to consignee - Dr. Consignment A/c Cr. Goods sent on Consignment A/c

Since goods are segregated to consignment from general trading a/c, therefore

Dr. Goods sent on consignment Cr. Trading A/c

2. On Sale on Goods on Consignment

Dr. Consignee A/c Cr. Consignment A/c

harini (student) (59 Points)
Replied 25 November 2009

I am a bit perplexed with the treatment given by rishab & jagbhushan

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 26 November 2009

No problem, I try to explain in a layman's language. When a firm employs somone as agent and sends goods for sale, the agent does not become owner of the goods. The sender i.e. consignor remains owner. As an analogy consignment account can be compared with Trading and P& L A/c. Just as all the expenses are debited to Tradeing/P&L A/c, similarly all the expenses incurred on account of the consignment are debited to consignment account inclusing the cost of goods sent. On receipt of goods the consignee will not make any entry in his books since they don't belong to him.

When goods are sold, the consignee informs consignor about the sale. On receipt of such information, the consignor makes this entry - Consignee A/c Dr. to Consignment A/c. Logic behind this is that since all expenses of consignment are debited to Consignment A/c all incomes will be credited to Consignment A/c. Secondly now consignee is in possession of consignor's money, that is why he is debited. At this point in time, the consignee will make this entry in his books. Cash/Bank A/c Dr. to Consignor. Consignor is credited because consignee is in possession of money actuall belonging to consignor. I hope now it should be clear.

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CA. Rishabh Mittal (CA in Practice) (1077 Points)
Replied 26 November 2009

Thx to further elaborate my point

malvernchipo (Bookkeeper) (21 Points)
Replied 12 February 2010

may you help by providing accounting treatment for consigment in books of consingee for all transactions

Anil Kumar (Sr. Accountant ) (33 Points)
Replied 25 February 2010

Thanx for such valuable information.

Still some questions ?

a) who will raise the invoice (TIN No. .....which one) to customer - conignor or consignee ?

b) who will make the entry of sale ?

Regard

Anil Kumar

rekhanshtrading@gmail.com (rekhanshtrading@gmail.com) (21 Points)
Replied 16 August 2011

Hi,

i would like to send goods on consignment from delhi to hyderabad through a courier company. TNT specifically. Now how do i send the goods to the stores without getting into entry forms etc , and proper invoices. The issue is with these retailers/, they have never provided anyone with entry forms and would only let me generate an invoice after one month, when sales actually happen .. please help

ABHINAV KUMAR (CHARTERED ACCOUNTANTS) (35 Points)
Replied 10 July 2012

My queri is

Consignor has booked the goodes sen on consignment as sale to consignee and consignee has booked the same as purchase and consignor has made the following entry

Party/consignee Dr

To Sales

and

Commission on sales Dr

to Consignee

Whether it is right and legal treatment of accounting as per Indian law

From Abhinav

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GAYATHRI B (STUDENT) (52 Points)
Replied 15 September 2019

Whether there is any rule that unsold goods in the hands of consignee to be brought into the books of consignor? If so, under which act or rules it specifies?