Consignment Flashcards
consignment?
when owner of goods sends goods to a second person to sell those goods on their behalf, without letting go of control over those goods
owner?
consignor
second person?
consignee/ agent
IFRS 15?
- control over inv is not transferred to agent
- inv remains in consignor’s accounting records
- movement is recorded -> no sale transaction occurs when goods sent to agent
- revenue from transaction is only recognised when agent sells goods on behalf of consignor and control over inv is transferred to buyer from consignor
agent handle consignment?
agent receives goods physically and directly sells goods to client, collects proceeds and delivers goods
agents not handle consignment?
agent offers goods for sale on behalf of owner from samples, price lists/ catalogues, receives orders, sends to owner who then carries out the order themself, by sending goods together with invoices, etc directly to buyer and collects account payments
remuneration to agent?
agent receives commission, usually expressed as % of SP
del credere commission?
agent receives commission higher than normal (additional commission) because they guarantee that all consignment debtors will pay their accounts
agent must pay proceeds from consignment over to consignor, even if some consignment debtor accounts are irrecoverable
agent carries risk of bad debts and therefore receives higher/ additional commission
paying over cash with regard to sales to debtors?
agent receives no del credere commission:
after debtors have settled their accounts
agent receives del credere commission:
after sales transaction has taken place
pro forma invoice?
consignor will send pro forma invoice with goods to agent, which contains details regarding consignment
invoice does not form debit against agent’s account but serves as memorandum
agent’s sale statement?
from time to time, agent report to consignor regarding sale of consignment
report = sales statement –> shows proceeds of goods sold, costs paid by agent on behalf of consignor, commission held back by agent & cash paid over by them
books of consignor?
record inv sent to agent on consignment, along with all costs & revenue in separate accounts
this is to keep record of inv on consignment
at end of year, separate consignment accounts will be added to the other line items o the financial statements
inventory sent on consignment to agent journal?
not sales transaction –> transfer between two inv accounts
dr consignment inv (sfp)
cr inventory
costs/ expenses incurred by consignor?
dr consignment inv (if forms part of cost price)/ consignment expense
cr creditors/ bank
costs/ expenses incurred by agent on behalf of cosignor?
dr consignment inv (if forms part of cost price)/ consignment expense
cr agent (sfp)
