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WEEK EIGHT (8)
TOPIC: Consignment Account
CONTENTS:
Consignment Account: (a) Consignment Accounts terminologies; meaning, consignment, consign or consignee, consignment outwards, consignment inwards, del-credere commission
Sub-topic 1: Meaning and explanation of:
- Consignment
- Consignor and Consignee
- Consignment inward and Consignment outward
Consignment: This is a process of sending goods by a person that owns the goods (Principal) to another person (agent) who agrees to sell the goods on behalf of the owner for a fee. The relationship between the consignor and the consignee is the principal – agent relationship.
Consignor: This is the person who sends the goods to the agent with the purpose of selling them on his behalf, for commission. The goods still belong to the principal even in the possession of the agent until the goods are sold and money dully remitted.
Consignee: This is the agent to which the goods were sent to by the principal for a commission. While goods are in his possession, he has no title to the goods.
Commission: This is the remuneration given to the consignee for selling the goods for the principal, this is usually expressed as a percentage of the value of sales.
Consignment outward: When goods are forwarded to the consignee, it is referred to a consignment outward. The consignment is called “outward” when the dispatch of a quantity of goods from one country to another is made for the purpose of sales. Goods sent on consignment do not become the property of the consignee because he has not bought them.
Consignment inwards: When goods are sent to the agent, the goods received by the agent is referred to as consignment inwards in the accounts of the agent.
Del-credere commission: This is a special commission given to the consignee for accepting the responsibility for any bad debts arising from sales made on credit.
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