CONSIGNMENT ACCOUNT

Consignment:
Consignment is an act of sending the goods by the owner to his agent, who agrees to collect, store and sell them on the risk and behalf of the owner on commission basis.

 Consignor:
The manufacture or wholesaler who sends his goods for sale purpose to his agent is known as consignor.

Consignee:
The person to whom the goods are sent for sale purpose is known as consignee.

Consignment outward:
When goods are dispatched by the consignor to consignee, it will be consignment outward from consignor's view point.

Consignment inward:
When goods are dispatched by the consignor to consignee, it will be consignment outward from consignee's view point.

Proforma invoice:
It is a forwarding letter sent by consignor to consignee along with the goods containing particulars as to the name of the item; number and the price.

Commission:
In connection with the consignment, the remuneration of the consignee for selling the goods of the consignor is called commission.

Delcredre commission:
The extra commission which is paid to consignee, if loss on account of bed debts is borne by him.

Abnormal loss of stock:
Any loss which occurs due to fire, accident, theft, negligence etc is known as abnormal loss of stock. Due to this loss consignment profit is not reduced.

Normal loss of stock:
A loss which occurs due to natural causes e.g. normal leakage, loss in weight due to nature of goods etc. is treated as 'normal loss'. such loss inflates the value of closing stock.

Overriding commission:
It is normally granted by consignor when he desires to work hard to push a new line of product in the market.

Consignment account:
This is by nature a profit and loss account. All expenses related to consignment are debited and all revenue are credited to this account. The deference between the two sides is known as profit or loss on consignment.