Consignment is an arrangement where a consignor sends goods to a consignee to sell on the consignor's behalf. The consignor retains ownership of the goods and bears the risk of loss. The consignee may receive a commission for promoting sales. An account sales report sent periodically by the consignee details sales, expenses, unsold stock, payments, and balances due. Consignment accounts track profit or loss over the life of the arrangement and abnormal losses are transferred from the consignment account to the income statement.

1. CPTSuccessRevision Notes – Fundamentals of AccountingChapter 7. Accounting for Special TransactionsUnit 1: Consignment

2. Chapter 7. Accounting for Special TransactionsUnit 1: ConsignmentConsignment account relates to account where Consignor (principal) sends goods to Consignee (agent) on the basis that the goods will be sold on behalf of and at the risk of the former. The risk of stock lies with Consignor even if stocks are lying in godown of consignee.

3. A proforma invoice is sent by consignor to consignee at the time of sending the goods. Proforma invoice consists the details of goods dispatched.

4. Commission provided by the Consignor to the Consignee to promote credit sale is known as Del-credere commission. When this commission is provided to the consignee, then consignor is not going to bear any bad-debts. ©Revision Notes - Fundamentals of AccountingCPTSuccesswww.cptsuccess.com