1 The ownership of goods remain with The ownership and possession of goods, both

the consignor and the’ possession is are transferred to the buyer immediately.
transferred to consignee.

2 The two parties involved are known as The two parties involved are known as buyer
consignor and consignee. and seller.

3 The relation between them is that of a The relation between them is of buyer and
principal and agent which continues for seller, which ends immediately after the
long period till it is ended. delivery and payment of the goods.

4 The risk of loss or damage is of the The risk passes with the ownership to the
owner (consignor). buyer.

5 The consignee sells goods for The goods are sold for profit against the price.
commission.

6 The expenses are borne by the After sales, the expenses are borne by the
consignor. buyer.

7 Consignee sends to consignor account The buyer does not needs to send any
sales from time to time. account sales to seller.

DESCRIPTIVE QUESTIONS
2001 - May [6] Briefly Explain the following:
(b) Account Sales (5 marks)
Answer:
It is a document or a statement sent by the consignee to the consignor from time to time.
Since the consignee sells the goods on behalf of the consignor, so he has to send a proper
statement either on sale of goods or at the end of a particular period. In account sales, the
consignee shows the details of the gross sales proceeds of the consignment. The various
expenses, charges incurred by him and the commission due to him is deducted. Any
advance payment to the consignor is deducted from the total amount due and the net
amount payable is shown. The net amount payable is sent to the consignor by a bank draft
or bills of exchange, as agreed.
2003 - Nov [6] Briefly explain the following:
(e) Over-riding Commission. (5 marks)
Answer:
It is an extra commission allowed over the normal commission. This commission is generally
offered when an agent is required to work hard either to introduce a new product in the
market or to handle the work of supervising the performance by other agents in a particular
area or for executing sales on consignment on a price higher than the price fixed by the
consignor.
PRACTICAL QUESTIONS
1996 - May [3] M/s Ram & Co., of Delhi purchased 20,000 pieces of sarees @ Rs. 200 per
saree. Out of these, 12,000 sarees were sent on consignment to M/s Laxman Traders of
Bombay at the selling price of Rs. 240 per saree. The consignors paid Rs. 6,000 for packing
and freight.
M/s Laxman Traders sold 10,000 sarees @ Rs. 250 per saree and incurred Rs. 2,000
towards selling expenses and remitted Rs. 10,00,000 to Delhi on account. M/s Laxman
Traders are entitled" to a commission of 5 percent on total sales plus a further 20 percent
commission on any surplus price realised over Rs. 240 per saree.
6,000 sarees were sold at Rs. 220 per saree by the consignor. Owing to fall in the market
price, the value of stock of sarees in hand is to be reduced by 10 percent.
Prepare the consignment account and the account of M/s Laxman Traders in the books of
the consignor. (15 marks)
Answer:
In the Books of M/s Ram & Co., Delhi
Consignment Account

Dr. Cr.

Particulars Amt (Rs.) Particulars Amt (Rs.)

To Goods sent on Consignment A/c 28,80,000 By Laxman Traders A/c 25,00,000

(12,000 × 240) (10,000 × 250)

To Bank 6,000 By Goods sent on 4,80,000

Consignment

To Laxman Traders (expenses) 2,000 (12,000x40)

To Laxman Traders (Commission) 1,45,000 By Stock on consignment 4,32,900

To Stock Reserve 72,000

To Net Profit 3,07,900

(Profit on Consignment

Transferred)

34,12,900 34,12,900

Laxman Traders Account

Particulars Amt (Rs.) Particulars Amt (Rs.)

To Consignment A/c (sales) 25,00,000 By Consignment A/c 2,000

By Consignment A/c (1) 1,45,000

By Bank A/c 10,00,000

By Balance c/d 13,53,000

25,00,000 25,00,000

Working Note:
1. Calculation of Commission Payable
5% on 25,00,000 = 1,25,000

20% on 1,00,000 = 20,000

1,45,000

2. Valuation of closing stock on consignment

2000 sarees @ Rs. 240 = 4,80,000

Add: Proportionate expenses

6,000 × 2,000 1,000

12,000

4,81,000

Less: Reduction in cost by10 % 48,100

Value of closing stock 4,32,900

1997 - May [4] (Or) X of Calcutta on 15th January, 1997 sent to Y of Bombay a consignment
of 250 televisions costing Rs. 10,000 each. Expenses of Rs. 7,000 were met by the
consignor. Y of Bombay spent Rs. 4,500 for clearance on 30th January, 1997 and the selling
expenses were Rs. 500 per television as and when the sale made by Y.
Y sold, on 4th March, 1997, 150 televisions at Rs. 14,000 per television and again on 10th
April, 1997, 75 televisions at Rs. 14,400.
Mr. Y was entitled to a commission of Rs. 500 per television sold, plus one-fourth of the
amount by which the gross sale proceeds less total commission there on exceeded a sum
calculated at the rate of Rs. 12,500 per television sold. Y sent the account sale and the
amount due to X on 30th April, 1997 by bank demand draft.
You are required to show the consignment account and Y's account in the books of X. (15
marks)
Answer:
Consignment Account

Dr. Cr.

Date Particulars Amt Date Particulars Amt

(Rs.) (Rs.)

1997 1997

Jan 15 To Goods Sent on March 4 By Y A/c (Sales) 21,00,000

Consignment A/c 25,00,000 April 10 By Y A/c (Sales) 10,80,000

Jan 15 To Bank A/c 7,000 April 30 By Stock on

Consignment

Jan 30 To Y A/c (Clearance 4,500 A/c (2) 2,51,150

 expenses)

March 4 To Y A/c (Selling 75,000

Expenses)

April 10 To Y A/c (Selling 37,500

Expenses)

April 30 To Y A/c (Commission) (1) 1,63,500

April 30 To Net Profit 6,43,650

34,31,150 34,31,150

Y (Bombay) Account

Dr. Cr.

Date Particulars Rs. Date Particulars Rs.

1997 1997

March 4 To Consignment A/c 21,00,000 Jan 30 By Consignment A/c 4,500

April 10 To Consignment A/c 10,80,000 March 4 By Consignment A/c 75,000

April 1 By Consignment A/c 37,500

April30 By Consignment A/c (1) 1,63,500

April 30 By Bank A/c 28,99,500

31,80,000 31,80,000

Working Notes :
1. Computation of commission
Let Total Commission be x
x = 225x500 +1/4[(21,00,000+10,80,000 - x - (12,500x225)]
x = 1,12,500 + 1/4 [31,80,000 - x - 28,12,500]
x x
x = 1,12,500 + 91,875 - 4 ;-x + 4 = 1,12,500 + 91,875
5x
= 2,04,375
4

x = 1,63,500
Total Commission = Rs.1,63,500
2. Valuation of closing stock

Rs.

25 televisions @ Rs. 10,000 2,50,000

 7000×25 700
Add: Proportionate expenses of the consignor ( 250
)

Add: Proportionate clearance expenses paid by the consignee

4,500 × 25 450
( )
250

2.51.150

1998 - May [3] (Or) D of Delhi appointed A of Agra as its selling agent on the following
terms:
(a) Goods to be sold at invoice price or over.
(b) A to be entitled to a commission of 7.5% on the invoice price and 20% of any surplus
price realised.
(c) The principals to draw on the agent a 30 days bill for 80% of the invoice price.
On 1st February, 1998, one thousand cycles were consigned to A, each cycle costing Rs.
640 including freight and invoiced at Rs. 800.
Before 31st March, 1998 (when the principal's books are closed) A met his acceptance on
the due date; sold off 820 cycles at an average price of Rs. 930 per cycle, the sale expenses
being Rs. 12,500; and remitted the amount due by means of Bank Draft.
Twenty of the unsold cycles were shop-soiled and were to be valued at a depreciation of
50%.
Show by means of ledger accounts how these transactions would be recorded in the books
of A, and find out the value of closing stock with A at which value D will account for the
balance stock. (15 marks)
Answer:
D’s Account

Dr. Cr.

Date Particulars Amt Date Particulars Amt

(Rs.) (Rs.)

1998 Feb. 1 To Bill Payable A/c 6,40,000 1998 Mar By Bank A/c 7,62,600
31

(80% of Rs. (820 cycles × Rs. 930)

8,00,000)

Mar. 31 To Cash A/c 12,500

Mar. 31 To Commission A/c 70,520

Mar. 31 To Bank A/c 39,580

7,62,600 7,62,600

Bills Payable Account

Dr. Cr.

Date Particulars Amt. Date Particulars Amt.

Rs. Rs.

1998 1998

March 4 To Bank A/c 6,40,000 Feb. 1 By D’s A/c 6,40,000

6,40,000 6,40,000

Value of Closing Stock with ‘A’

Rs.

160 cycles at Rs. 640 (cost price including freight) 1,02,400

20 Cycles shop-soiled at 50 % of the Rs. 640 i.e. Rs. 320 each 6,400

Value of closing stock with A 1,08,800