Monday 8 September 2014

FINANCIAL ACCOUNTING SSS THREE



CONSIGNMENT ACCOUNT

Consignment accounts are concerned with goods sent to an agent who will sell the goods on behalf of his principal. That is, goods sent to an agent for sale on behalf of the principal. The agent here is a consignee (receiver of a consignment) and the principal is a consignor (sender of a consignment).

Terminologies in consignment accounts.

1.     Del credere agent. Occasionally an agent may sell part of the goods on credit. This credit sales may result in bad debts that will affect the principal. If however the agent guarantees against bad debts, he (agent) receives extra commission in consideration of such undertaking. Thus, he is called del credere agent  and the commission he receives is del credere commission. In most cases the commission is shown separately from the ordinary commission.

2.     Account sales. This is a statement showing the gross proceeds, expenses incurred, agents commission and the net proceeds due to the consignor. This is the document that helps the consignor to make further entries in his books of account.

3.     Consignment outwards. When goods are sent by the consignor to the consignee.

4.     Consignment inwards. When goods are received by the consignee.

5.     E&O.E. Errors and omissions expected. That is the consignor will accept any error caused in the transaction.

6.     Pro forma invoice. Since the goods are not sold to the agent, a pro forma invoice is used when the goods are sent to him. It means for form’s sake.
NB: This document does not change but communicates information and it will inform the agent of the price at which he is expected to sell the goods.    

Test your understanding
      Mention the company that practice consignment business. State ten.
Compiled by: Akerele Adedayo E.
      Enquires contact:
      dedayo87@gmail.com
      08162875768, 08057415945


No comments:

Post a Comment