The Coffee Bean & Tea Leaf(CBTL), Business strategy case study
Consignment
1. WELCOME TO MY PRESENTATION
TOPIC ON
CONSIGNMENT ACCOUNT
SUBMITTED TO
Prof - ISHAN ARORA
SUBMITTED BY
RAJU SINGH
B.COM 2ND SEM.
GURU NANAK COLLAGE,PHAGWARA
3. CONTENTS
1. Meaning
2. Importance's
3. Name of party
4. Type of Commission
5. Consignment Expenses
6. Diff. b/w consignment and sale
7. Consignment Loss
8. Accounting treatment
9. Method of Accounting
10. Conclusion
Consignment
4. Meaning
The producers cannot reach everywhere to sell their
produce. They reach their consumers l through the
wholesalers or retailers. They also hire other channels for
distribution of goods. The goods are also made available at
different places through the agents and agencies.
Generally it is seen that a producer or a wholesaler
appoints agents at different markets or in different parts of
the country to sell goods on their behalf against
commission. One such arrangement is consignment.
6. Importance of Consignment
Consignment helps producers to bring economies of large-scale
production with the increased sale. It facilitates high sale as a
result of which large scale of production is required and this
leads to economies of scale as large-scale production results to
fall in cost per unit.
It is more profitable for those manufacturers who are having
their branches at different places in domestic country or in other
countries. As in such situations, the local agents of that place
have much knowledge of that market as compared to the
manufacturers. So he facilitates more profitable sale by
approaching local customers.
If prospective buyer is not easily approachable by a producer
because of long distance between them the agent plays an
important role to contact them on regular basis and to ensure
prompt delivery of goods to them out of his stock of consigned
goods by consignor.
9. 1) Simple commission :-It is that commission which is
paid to an total selling the goods of consignor. It is
calculated on total sales (cash + credit).
2) Dell commission:- It is that commission which is
given to consignee for guarantee credit sale (full
collection from debtors). It is calculated on total sale
unless otherwise stated in the question. This
commission given for taking the guarantee of credit
sale.
3) Over riding commission :-It is that commission
which is given for selling the goods at a price higher
than the normal selling price is known as ‘surplus
price’. It is calculated on surplus price at a given rate .
10. Consignment expenses
Consignment expenses are those expenses that are to
be incurred by consignor and/or consignee for the
goods sent on consignment. They are of two types:-
1. Non recurring or direct expense:-Are those exp.
Which are incurred for a receiving the goods .They
are paid only once when goods are received like
caries ,freight ,un-loading and loading.
2. Recurring or indirect expense:- Are those exp.
Which are paid by consignee for selling the goods.
They are in recurring nature like godown/shop rent
advertisement insurance premium etc.
11. Basis Consignment Sale
1. Name of parties 1) Consignor
2) consignee
1) Seller
2) buyer
2. Relationship principle and agent debtor and creditor
3.Return of goods Consignee has the right the
goods in case he is not in
possession to sell them.
In case of sale goods one for can
not be return to the seller.
4.After delivery
expense
In consignment after delivery
expenses are born by consignor
those paid by consignee
In case of sale after delivery
expense are born by buyer
5.Return or reward In case of consignment the
whole profit belong to
consignor. Consignee gets
commission only
In case of sale the whole profit
belong to seller it is not shared
buyer
6.Transfer of risk in Case of consignment risk is
not transferred any loss or
damages to the goods will be
born by consignor
In case of sale risk is transfer from
seller to buyer any loss or damages
to the goods will be born by buyer.
12. Consignment loss
The goods sent by consignor to consignee may suffer
two type loss:-
1. Normal Loss 2. Abnormal Loss
1.Normal Loss :-It is that loss which arise due to
nature of goods or types of goods.
This loss cannot be fully check or no
fully control.
FOR EXAMPLE:- loss of coal due to
loading and unloading.
13. 2.Abnormal Loss:-Its that loss whoch aries due to
negligence or carelessness. This loss can be fully
check or control. This loss can divided into two
parts :-
a) loss in transit b)loss at consignee place
a)Loss in transit:-It is that types of abnormal loss
which arises when the goods are on the way from
consignor to consignee FOR EXAMPLE:-goods may be
damages in transit due to accidents.
14. b) Loss at consignee place:-It is
that types of abnormal loss which
accurse (take place) after reaching
the goods to consignee for
example :- goods may be destroyed
by fire
16. Method of Accounting
Generally there are two different methods of preparing
accounts relating to the consignment of goods. These
are (1) Cost Price Method and (2) Invoice Price
Method. These two methods are described as under:-
1. Cost Price
Under this method, entries relating to consignment in
the books of consignor are passed with the actual cost
of goods and amount spent or expenses incurred by
him.
17. Invoice price :-when consignor sent to the goods to
consignee at invoice price (not at cost price)
invoice price is normal selling price which is
cost price + profit.
consignment at invoice price (I.P)
cost price + profit = I.P
(100 + 50) =150
18. Valuation of stock
It is not always possible that total stock of consigned
goods is sold out by consignee. Some stock can remain
unsold with the consignee. These goods that remain
unsold with the consignee are known as consignment
stock. Their valuation is required to record such
consignment stock in the balance sheet of consignor.
This stock that is left with the consignee is valued at
cost price or market price whichever is less.