Definitions of Important Terms Used in Consignment
Accounting:
Learning Objectives:
-
Define the most important
terms used in consignment account.
Commission:
The term commission as used in
connection with consignment denotes the remuneration of the consignee for
selling the goods of the consignor. This commission is generally calculated
at a rate percentage on the gross proceeds of the sales.
Del Credere Commission:
The del credere commission is an
extra commission allowed to the consignee on his guaranteeing the
realization of the debts in full, in connection with the credit sale of
goods on consignment. Goods may be sold by the consignee either for cash or
on credit. When they are sold on credit, the consignee may guarantee that
they will be duly paid for and that he will be liable to indemnify the
consignor for all bad debts. In such cases; the consignor pays the consignee
an extra commission for this guarantee. The extra commission is called del
credere commission.
Advance Against Consignment:
Usually the consignee is asked to accept a
bill of exchange to cover part of the value of goods. This is a guarantee by
the consignee that when sales are effected, he will make the necessary
payment. Of course, instead of a bill of exchange, the agent may remit a sum
of money to the principle as an advance. This advance or the amount of the
bill of exchange will be adjusted when the goods are sold.
Consignment Account:
The consignment account is one which shows
what profit or loss is made out of the dealing of the goods sent on
consignment. It is the combination of the trading and profit and loss
account of any particular consignment.
Pro forma Invoice:
When the consignor sends the goods to the
consignee, he forwards a statement showing the particulars such as quantity,
quality, price of goods etc. This statement is called the Pro forma invoice.
But in case of regular sale, an invoice is prepared and sent along with the
goods. It implies that a sale has taken place.
Account Sale:
An account sale is a statement prepared and
sent by the consignee to the consignor at periodical intervals, dealing
there in the goods sold, price realized, expenses incurred, commission
payable to and the net amount due from the consignee. The following is a
specimen form:
[Format/Example of Account Sale]
Account sales of 75 cases of fancy goods received from
and sold on account and risk of Messers A & Co.
| |
$ |
$ |
| 35 case of
fancy goods at $150 per case |
5,250 |
|
| 40 cases of
fancy goods at $200 per case |
8,000 |
|
| |
|
13,250 |
| Less
Charges and Expenses: |
|
|
|
Freight & Cartage |
50 |
|
|
Brokerage |
10 |
|
|
Insurance |
150 |
|
|
Storage |
200 |
|
|
Commission at 10 percent of sales |
1,325 |
|
| |
|
1,735 |
| |
|
|
| |
|
11,515 |
| Less Amount of
our acceptance given in advance |
|
10,000 |
| |
|
|
| Bank draft now
enclosed |
|
1,515 |
| |
|
|
| E. & O. E. |
Signed: |
|
|
New York, 26 December. 2009 |
|
A & Co. |
|
