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(P2) Consignment Sales - Quick Notes

Net Income The document discusses accounting for consignment sales. Freight charges for returned units are allocated to the period's sales. Excess freight is expensed. Administrative costs are not allocated to consignment sales as it is impractical to do so, resulting in overstated sales. Sight drafts are like advances. Expenses that increase the value of units can be capitalized. Payables for consigned goods usually refer to remittances. Always check givens are correct when solving problems, such as commission rates and allocated costs, and ensure sales equal units sold times price.

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337 views

(P2) Consignment Sales - Quick Notes

Net Income The document discusses accounting for consignment sales. Freight charges for returned units are allocated to the period's sales. Excess freight is expensed. Administrative costs are not allocated to consignment sales as it is impractical to do so, resulting in overstated sales. Sight drafts are like advances. Expenses that increase the value of units can be capitalized. Payables for consigned goods usually refer to remittances. Always check givens are correct when solving problems, such as commission rates and allocated costs, and ensure sales equal units sold times price.

Uploaded by

looter198
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Consignment Sales

Freight Charges on units returned are charged against the sales of the same period, which
means that the numerator for computing the allocated freight charges for the period would be the
sold units plus units returned.

Excessive freights are expensed.

Administrative Costs are not allocated to Consignment Sales because it is neither practical nor
feasible to do so. Thus, Consignment Sales are usually overstated.

Sight Drafts are like advances

If expenses incurred increases the value of the units, then capitalize it (i.e. repairs expense that
actually increase its value or bring the units into a salable condition)

Payable for consigned goods means remittance (usually)

When answering problems

Always check if the givens are correct, so make sure to re-compute them (i.e. commission, allocated

freight, and other allocated costs)


Check if the given sales is equal to sold units x sale price, especially if there are more than two
sale prices.

Consignor
Debit
Shipment of Goods

Consignee
Credit

Debit

Credit

Inventory on Consignment

Inventory / Consignment
Shipments

Inventory on Consignment

Cash

Inventory on Consignment

Consignee Payable

Consignor Receivable

Cash

Advances by Consignor

Cash

Advances from
Consignee

Advances to Consignor

Cash

Advances by Consignee

Advances to Consignee

Cash

Cash

Advances from
Consignor

Excess Cash Remittance

Cash

Advances from
Consignee

Consignor Receivable

Sale

Cash

Consignor Payable

(Reverse if Goods are returned)


Related Expenses paid by
Consignor
Related Expenses paid by
Consignee

Cash remitted is less than the


amount in Account Sales Report
Sale of Merchandise

None

None
(memorandum entry)

None

Remittance

Cash
Consignee Payable
Advances from Consignee
Commission Expense

Recording of Cost of Goods Sold

Cost of Goods Sold

Notification of Sale and

Sale

Consignor Payable

Inventory on
Consignment

Cash
Consignor Receivable
Advances to Consignor
Commission Revenue

None

Remittance
Sale (Consignor Payable)
Less:
o
o
o

Related Expensed paid by Consignee


Advances to Consignor
Consignees Commission

Net Income
Notes
Sale (Consignor Payable)

(Sold Units x Sales Price)

Less:
Cost of Consigned Goods

(Sold Units x Cost)

o
o

Related Expensed paid by Consignee


Related Expensed paid by Consignor

Expensed as incurred except for Freight


Freight shall be allocated with the
numerator consisting of SOLD UNITS AND
UNITS RETURNED

Consignees Commission

Usually as a percentage of sales

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