AccountancyConsignment accounts, with a solved example
Goods sent on consignment are not sold to the agent. They stay the sender's property until the agent sells them to someone else.
What consignment is
A manufacturer or wholesaler who wants to sell in a distant market may send goods to an agent there. The sender is the consignor (principal) and the agent is the consignee. The consignee sells the goods on behalf of the consignor, at the consignor's risk, and earns a commission. The goods remain the consignor's property: unsold goods, and any loss, belong to him.
Consignment and sale compared
| Basis | Consignment | Sale |
|---|---|---|
| Ownership | Stays with the consignor until goods are sold to a customer | Passes to the buyer at once |
| Relationship | Principal and agent | Seller and buyer (creditor and debtor) |
| Risk of loss | Consignor | Buyer |
| Unsold goods | Belong to consignor; can be returned | Buyer cannot return without agreement |
| Expenses after dispatch | Borne by consignor | Borne by buyer |
Documents and terms
- Proforma invoice: a statement sent with the goods showing quantity, description and price. It is not a sales invoice.
- Account sales: the periodic statement sent by the consignee showing goods sold, expenses paid, commission charged and the net amount due.
- Ordinary commission: a percentage of sales for selling the goods.
- Del credere commission: an extra commission for which the consignee bears the risk of bad debts on credit sales.
- Over-riding commission: an extra commission on sales above a target or above invoice price.
- Non-recurring expenses: spent to bring the goods to the consignee's godown: freight, insurance in transit, loading, unloading, customs duty.
- Recurring expenses: spent after the goods reach the godown: godown rent, storage insurance, advertising, salesmen's pay.
Accounts in the consignor's books
- Consignment Account (one for each consignment, named after the place): a nominal account showing profit or loss on the consignment.
- Consignee's Account: a personal account showing what the consignee owes.
- Goods Sent on Consignment Account: closed by transfer to the Trading (or Purchases) Account.
Valuation of unsold stock
Stock with the consignee is valued at cost plus a proportionate share of non-recurring expenses (those incurred by the consignor and by the consignee up to the godown), or at market price if that is lower. Recurring expenses are not included, because they do not add to the value of the unsold goods.
Solved example
Anil of Delhi consigned 100 ceiling fans, costing ₹2,000 each, to Bala of Jaipur. Anil paid ₹10,000 for freight and insurance. Bala paid ₹4,000 for unloading and cartage to the godown and ₹6,000 for selling expenses. Bala sold 80 fans at ₹2,800 each and is entitled to a commission of 5% on sales. He sent an account sales with a bank draft for the balance.
Working
- Sales = 80 × ₹2,800 = ₹2,24,000. Commission = 5% of ₹2,24,000 = ₹11,200.
- Unsold stock = 20 fans. Cost = 20 × ₹2,000 = ₹40,000.
- Non-recurring expenses = ₹10,000 + ₹4,000 = ₹14,000 on 100 fans; share of 20 fans = ₹2,800.
- Value of unsold stock = ₹40,000 + ₹2,800 = ₹42,800.
| Date | Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|---|
| Consignment to Jaipur A/c Dr. | 2,00,000 | ||
| To Goods Sent on Consignment A/c | 2,00,000 | ||
| (100 fans sent on consignment at cost) | |||
| Consignment to Jaipur A/c Dr. | 10,000 | ||
| To Bank A/c | 10,000 | ||
| (Freight and insurance paid) | |||
| Bala Dr. | 2,24,000 | ||
| To Consignment to Jaipur A/c | 2,24,000 | ||
| (Sales made by the consignee) | |||
| Consignment to Jaipur A/c Dr. | 21,200 | ||
| To Bala | 21,200 | ||
| (Expenses ₹10,000 and commission ₹11,200 as per account sales) | |||
| Bank A/c Dr. | 2,02,800 | ||
| To Bala | 2,02,800 | ||
| (Draft received for the balance) | |||
| Stock on Consignment A/c Dr. | 42,800 | ||
| To Consignment to Jaipur A/c | 42,800 | ||
| (Value of unsold stock) | |||
| Consignment to Jaipur A/c Dr. | 35,600 | ||
| To Profit and Loss A/c | 35,600 | ||
| (Profit on consignment transferred) | |||
| Total | 7,36,400 | 7,36,400 | |
| Date | Particulars | ₹ | Date | Particulars | ₹ |
|---|---|---|---|---|---|
| To Goods Sent on Consignment A/c | 2,00,000 | By Bala (sales) | 2,24,000 | ||
| To Bank A/c (freight and insurance) | 10,000 | By Stock on Consignment A/c | 42,800 | ||
| To Bala (unloading 4,000 + selling expenses 6,000) | 10,000 | ||||
| To Bala (commission) | 11,200 | ||||
| To Profit and Loss A/c (profit) | 35,600 | ||||
| 2,66,800 | 2,66,800 |
| Date | Particulars | ₹ | Date | Particulars | ₹ |
|---|---|---|---|---|---|
| To Consignment to Jaipur A/c (sales) | 2,24,000 | By Consignment to Jaipur A/c (expenses) | 10,000 | ||
| By Consignment to Jaipur A/c (commission) | 11,200 | ||||
| By Bank A/c | 2,02,800 | ||||
| 2,24,000 | 2,24,000 |
Profit on the consignment is ₹35,600. A quick check: profit on 80 fans sold = 80 × (2,800 − 2,000) = ₹64,000; less the share of non-recurring expenses for 80 fans ₹11,200, selling expenses ₹6,000 and commission ₹11,200 = ₹35,600.
In the books of the consignee
Bala does not record the receipt of goods, since they are not his. He records only cash and his commission.
| Date | Particulars | Dr. (₹) | Cr. (₹) |
|---|---|---|---|
| Anil Dr. | 10,000 | ||
| To Bank A/c | 10,000 | ||
| (Expenses paid on behalf of the consignor) | |||
| Bank A/c Dr. | 2,24,000 | ||
| To Anil | 2,24,000 | ||
| (Sale of consigned goods) | |||
| Anil Dr. | 11,200 | ||
| To Commission A/c | 11,200 | ||
| (Commission earned) | |||
| Anil Dr. | 2,02,800 | ||
| To Bank A/c | 2,02,800 | ||
| (Balance remitted) | |||
| Total | 4,48,000 | 4,48,000 | |
Loss of goods
Normal loss is unavoidable: evaporation, leakage, breaking of bulk. It is not shown separately. Its cost is spread over the remaining good units, so the value per unit of stock rises.
Abnormal loss is avoidable or accidental: theft, fire, accident in transit. It is valued like stock (cost plus proportionate non-recurring expenses up to the point of loss) and credited to the Consignment Account, so that the profit on consignment is not distorted. Any amount recovered from insurance is debited to the insurer; the rest goes to the Profit and Loss Account.
Example of normal loss. 1,000 kg of a chemical costing ₹50 a kg is consigned with freight ₹5,000. Normal loss is 50 kg. 800 kg are sold. Total cost = ₹55,000 for 950 kg of good units. Unsold stock = 150 kg, valued at ₹55,000 × 150/950 = ₹8,684 (to the nearest rupee).
Goods sent at invoice price
The consignor may invoice the goods above cost, so that the consignee does not learn the real profit. The excess over cost is called loading. At the end, loading is removed by adjusting entries on goods sent, on opening and closing stock (through a Stock Reserve Account), so that the true profit is shown. If the fans above had been invoiced at ₹2,500 each, the loading on unsold stock would be 20 × ₹500 = ₹10,000.
Questions students ask
Who owns the goods sent on consignment?
The consignor. Ownership does not pass to the consignee, who is only an agent selling on the consignor's behalf.
How is unsold stock on consignment valued?
At cost plus the proportionate non-recurring expenses incurred to bring the goods to the consignee's godown, or at market price if lower.
What is del credere commission?
An additional commission paid to the consignee, in return for which he bears any loss from bad debts on credit sales.
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For study, and independent. These pages explain accountancy as it is generally taught in Class 11, Class 12 and B.Com courses in India, in our own words with our own examples, reviewed in November 2026. This site is not connected with NCERT, CBSE, ICAI or any board or university. Syllabuses change: follow your own board's or university's current syllabus and textbook. Nothing here is professional accounting, tax or legal advice.