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Consignment Sales Notes

The document discusses consignment sales between a principal and an agent. Under consignment sales, the principal transfers merchandise to the agent without transferring ownership, and the agent sells the goods on behalf of the principal for a commission. The agent does not recognize the consigned inventory but instead records a memo entry. Revenue is recognized by the principal only after the agent notifies the principal of a sale and remits the sales cash. Expenses paid by each party relating to the consigned goods are capitalized to the inventory balance. The principal and agent use accounting entries to track inventory, sales, commissions, and payments between them for the consigned goods.

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Sittiehaina Galman
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192 views2 pages

Consignment Sales Notes

The document discusses consignment sales between a principal and an agent. Under consignment sales, the principal transfers merchandise to the agent without transferring ownership, and the agent sells the goods on behalf of the principal for a commission. The agent does not recognize the consigned inventory but instead records a memo entry. Revenue is recognized by the principal only after the agent notifies the principal of a sale and remits the sales cash. Expenses paid by each party relating to the consigned goods are capitalized to the inventory balance. The principal and agent use accounting entries to track inventory, sales, commissions, and payments between them for the consigned goods.

Uploaded by

Sittiehaina Galman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ACT130_Bb

CONSIGNMENT SALES

Principal (CONSIGNOR)  Agent (CONSIGNEE) for commission

 Liability for the amount due to the consignor


 Less expenses paid by Agent
 No recognition of inventory by consignee but a memo
- Transfers merchandise without the transfer of ownership/title
- Revenue recognition until there’s a sale made by agent
o After notification of the sale and sales cash remittance

PRINCIPAL AGENT

Inventory on consignment XX
MEMO ENTRY
Inventory XX
 Directly attributable cost paid by PRINCIPAL for the
Consigned good is added/capitalizable to the
Inventory balance (expenses in consignment/from
Principal to Agent)

Inventory on consignment XX
Cash XX NO ENTRY

 Directly attributable cost paid by AGENT for the


Consigned good is added/capitalizable to the
Inventory balance

Inventory on consignment XX Receivable from Principal XX


Payable to Agent XX Cash XX
 Advances (commission from PRINCIPAL to AGENT)

Receivable from Agent XX Cash XX


Cash XX Payable to Principal XX
 Merch sold by consignee

Receivable from Agent XX Cash XX


Sales (total sales by A) XX Payable to Principal XX
 Cost of sales, including directly attributable cost,
Before multiplying the percentage of merch sold by
Agent

Cost of Sales XX
Inv. on consignment XX
 Commission on total sales by Agent
 It is an expense, presented in the Income
Statement e.g., Freight-in

Sales commission XX Receivable from Agent XX

Payable to Agent XX Commission income XX

CLOSING ENTRIES: (squeeze the amount from the


above entries) Payable to Agent XX
Cash XX Receivable from Principal
Payable to Agent Cash XX
Receivable from principal XX

Summary on T-Account

INVENTONRY ON CONSIGNMENT
Beg,

Cost of goods shipped on consignment Cost of goods returned by the Agent


(From PRINCIPAL to AGENT)
EXPENSES on consignment paid by PRINCIPAL Cost of consignment sales and expenses relating
to consignment
REIMBURSABLE EXPENSES on consignment paid
by AGENT

END, balance
*Advertised price = selling price

Other illustration:

Remittance Consignment Profit

Payable to Principal XX SALES XX

Commission Income LESS: Cost of Goods (xx)


Cash XX Expenses on consignment paid (xx)
by PRINCIPAL
Sales commission (xx)
Expenses on returned goods to (xx)
PRINCIPAL (shipping fee PRORATA)

PROFIT

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