ACC201 LECTURE NOTE ON CONSIGNMENT BY MR.

MUHAMMED LAWAL SUBAIR(ELEYELE)

ACCOUNTING ENTRIES IN THE CONSIGNOR’S BOOK

1. When Goods Are Dispatched:
Debit Consignment Account; Credit Goods Sent on Consignment Account or
Consignment
Outwards Account with the cost price of the goods.
2. If A Bill Is Drawn on Consignee:
Debit Bills Receivable Account
Credit the Personal Account of the Consignee
3. Expenses Paid By Consignor
Debit Consignment Account
Credit Cash/Bank or Creditors with expenses paid or incurred by the consignor
4. On Receipt of Account Sales from The Consignee
Debit the Consignee’s Account
Credit the Consignment Account with gross proceeds from sales.
5. Expenses Deputed By The Consignee
Debit the Consignment Account
Credit Consignee’s Account with expenses, brokerage, commission etc. deducted by the
consignee
6. If the whole of the goods have been sold, the balance on Consignment Account represents
the profit or loss on the consignment and should be transferred to Statement of Profit or
Loss.
7. Upon Payment By The Consignee
Balance on consignee’s account represents amount due from or to him in respect of sales
made. The accounting entries are.
Debit Cash/Bank or Bills Receivable Account, Credit Consignee’s Account with the
amount of cash received or face valve of bills receivable.
8. Balance on the Goods Sents on Consignment Outwards Account should, at the end of the
accounting period, be transferred to the Trading Account to get the true gross profit on
sales.
Note:
If a statement of financial position were to be prepared before the goods are sold, the
debit balance is carried forward and treated in the statement of financial position as
inventory on consignment.
9. Unsold Consignments.
At the cost of the trading period, any unsold inventory must be brought into the final
accounts at cost price plus a proportionate pat of any charges incurred by the consignor
and/or consignee in respect of the entire consignment. For example, if a carriage
amounting to N60 has been incurred on a consignment of 100 tons, 25 tons of which
remain unsold, the N15, i.e 25 x N60, will be added to the cost of the unsold portion and
carried forward. 100
On the other hand, if certain expenses have been incurred in selling in 75 tons, no portion
thereof can be carried forward as part of the value of the unsold portion of the
consignment.
ACCOUNTING ENTRIES IN THE CONSIGNEE’S BOOKS
1. IF A Bill of Exchange Drawn By The Consignor Is Accepted.
Debit the Consignor’s Personal Account
Credit Bills Payable Account.
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ACC201 LECTURE NOTE ON CONSIGNMENT BY MR. MUHAMMED LAWAL SUBAIR(ELEYELE)

2. Expenses Incurred In connection with Advertising and Selling The Goods

Debit Consignor’s Account,
Credit Cash/Bank, or a personal account, as the case may be.
3. When The Goods Are Sold
Debit Cash/Bank or the purchaser
Credit Consignor’s account with sale proceeds.
4. After Preparing Account Sales
Debit Consignor’s account
Credit Commission income/brokerage etc. with the amount of commission and brokerage
receivable/payable by consignee.
5. Remittance Made to the Consignor
Debit the Consignor’s personal account; Credit Cash/Bank with the amount of any
remittance made to the consignor.
When the consignee is making up his accounts at the end of the trading period, the balance (if
any) of the consignor’s personal account will be included in the totals of sundry receivables or
sundry payables in the statement of financial position, account will, of course, be transferred to
the credit of Statement of Profit or Loss.
Any unsold portion of the consignment must not be included in the consignee’s stock-in-trade,
since the goods do not belong to him.
Valuation of Stock on Consignment
In arriving at the closing stock valuation, only amounts relating to unsold stock are included,
thus the agent’s expenses incurred on the incoming consignment are included but certain items
of a marketing nature are excluded from the calculation on the ground that they relate to the
goods which have been sold and not to those remaining unsold.
Closing stock value thus comprises the aggregate of the initial cost of the goods plus the
relevant (attributable) costs of both the consignor and consignee.
Loss of Good on Transit
Good on consignment may be damaged or lost before reaching the consignee. Where the
loss is covered by insurance, the cost of goods lost should be ascertain (using the formula
below), debited to insurance claim account and credited to the consignment account. In
computing the cost of goods lost only the costs incurred by the consignor are relevant since the
goods were lost before they got to the consignee. The formula for computing the cost of goods
lost is:
'
Quantity Lost x Consigno r s Costs
Cost of Goods Lost=
Quantity Consigned
When the claim is received from the insurance company, the amount received is debited
to the cashbook and credited to the insurance claim account. The short fall, if any, between the
amount received and the cost of the goods lost should be written off from the insurance claim
account to the profit and loss account.
Where the loss is not covered by insurance, the cost of goods lost is debited to the profit
and loss account and credited to consignment account.
However where there is a deficiency of stock in consignee’s hand at stock-taking and the
consignee is liable to account for the deficiency, the cost of missing stock should be ascertained
and debited to the consignee account while the consignment account is credited. The cost of the
missing will be the proportion of the total cost (i.e. consignor’s costs plus consignee’s relevant
costs) which the missing quantity beers to the total quantity consigned.

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ACC201 LECTURE NOTE ON CONSIGNMENT BY MR. MUHAMMED LAWAL SUBAIR(ELEYELE)
'
Quantity Lost x Consigno r s Costs + Consignee's Relevant Cost
Cost of Goods Lost=
Quantity Consigned
Valuation of Unsold Stock in Consignee’s Hand
If at the accounting year of the consignor, some of the goods remain unsold in the hand of the
consignee, these are valued at cost or local net realizable value. Whichever is lower. The value
of the unsold stock is then credited to the consignment account and carried down on the same
account as a debit balance.
There are two different formulae for calculating the cost of the unsold stock:
(i) Where no loss of goods has taken place:
'
Qty Sold x Consigno r s Costs '
Unsold Stock= +Qty Sold x Consigne e sRelevant Cost
Qty Consigned
(ii) Where loss of goods has occurred:
' '
Qty Sold x Consigno r s Costs Qty Sold x Consigne e sRelevant Cost
Unsold Stock= + −Less Qty Lost
Qty Consigned Qty Consigned

QUESTION ONE
Bush of America Consigned 1000 units of goods to Bello of Ilorin. The cost price of the goods
was N800. Bush paid the following expenses:
N
Carriage 220
Marine Insurance 80
Freight Charges 90
Bello also incurred the following expenses:
Carriage from Dock 15
Import Duty 45
Carriage on Sales 50
Selling Expenses 100
Bello sold 600 units of N1,300 and was entitled to 8% commission plus 2% del credere
commission. Bello sent a draft for the balance.
Required: Show the accounts of the consignment in the books of the consignor and the accounts
in the books of the Consignee.
QUESTION TWO
Adedo a dealer in fishing net in Ilorin, consigned 100 bundles of fishing net costing N500 each
to his agent Ndama in Lafiagi on 1st January, 2007 on the following terms.
(i) The minimum selling price of Ndama to be cost plus 5%
(ii) Ndama to be allowed a normal commission of 10% on sales and in addition, a del-credere
commission of 5%.
Adedo paid the following expenses in respect of the goods consigned.
Haulage N1,200
Insurance N800
On 30thApril, 2007, Ndama forwarded to Adedo an interim account sale showing the
following transactions and enclosing a cheque for the balance.
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ACC201 LECTURE NOTE ON CONSIGNMENT BY MR. MUHAMMED LAWAL SUBAIR(ELEYELE)

Sales: 15 bundles of nets at N900 each on credit

45 bundles of nets at N950 each on cash
20 bundles of nets at N750 each for cash
Expenses: Storage charges N400
Transportation N700
Selling Expenses N1,800
st
On 31 May, 2007, Adedo received the final account sales from Ndama showing that the
remaining bundles of nets had been sold for cash at N800 each. Ndama incurred further selling
expenses of N600 of this credit sales, N500 proved irrecoverable. Ndama sent a cheque for the
balance due.
You are required to show the necessary entries in the books of the Consignor and Consignee.
QUESTION THREE
Miraj & Co Ltd of London consigned goods to the value of N10,000 to their agent, Imran in
Nigeria. They paid freight, insurance, etc. N420, and they drew on Imran at 90 days for N7,500;
this bill Miraj & Co Ltd Discount with their bankers, the charge therefore being N100. In due
course Imran renders an Account Sales showing the amount for which the goods were disposed
of as being N12,500. He deducts his commission, which is 7 1/2%, and expenses N100, and remits
a draft through for the balance.
Required
Show the necessary ledger accounts in the books of both consignor and consignee.
QUESTION FOUR
On 1st July 2014, AKOSUA & Co of Kumasi consigned 100 pieces of Kent cloth costing N50
each to their agents Kofi Boutique Ltd, Acra, on the following teams.
i. Akosua & Co is to draw 90- day bill of exchange on Kofi Boutique Ltd. For 75 percent
on the value of goods consigned.
ii. The normal selling price of goods to be cost plus 50%
iii. Kofi Boutique ltd. Is to be allowed a commission at the rate of percent on normal selling
price, plus 20 percent on all receipts above normal selling price.
Akosua & Co drew the bill of exchange as arranged and discounted it at the bank paying
discounting charges of N150, the bill was honoured on the due date. Other expenses paid by
Akosua & Co are: N
Postage 90
Insurance 50
Excise Duty 60
On 31st October 2014, Kofi Boutique Ltd. Forwarded to Akosua & Co an Account sales showing
the following transactions and enclosing a cheque for the balance:
15 pieces of Kente cloth sold at N90
45 pieces of Kente cloth sold at N80
20 pieces of Kente cloth sold at N75
Expenses
Storage charges N40
Selling expenses N70
Delivery fee (paid to the post office on collection of goods) N240
You are required to:
(a) Reproduce the Account Sales from Boutique Ltd.
(b) Show how the transactions would appear in the books of the consignor

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ACC201 LECTURE NOTE ON CONSIGNMENT BY MR. MUHAMMED LAWAL SUBAIR(ELEYELE)

(c) Draw up a revised Consignment Account taking into consideration the following
additional information:
(i) a parcel containing four pieces of Kente clot h was lost in transit
(ii) an insurance claim for N206 covering the cost of goods up to the time loss was
honoured by the Insurance Company.
QUESTION FIVE
On 2nd May,2023. Eleyele and Sons of Kwara consigned 240 bags of coffee to their del credere
agent, Fine Fine Product ltd in Bidad hometown. The coffee which had cost N35 per bag was
invoiced pro forma at a required minimum selling price of N75 per bag. Carriage amounted to
N940 and casual labour N20.
Fine-Fine Product ltd were to have a commission (on del credere terms) of 12 1/2 % on the gross
proceeds of the sale and recover all expenses.
The goods were delivered three days afterwords together with the invoice and a bill of exchange
for N5,000 drawn on Fine-Fine Product lld and payable two months after acceptance. The bill
was accepted and returned to Eleyele who discounted it for N5,700.
On 31st July, received on account sales from the agent dated 25 th July showing that 140 bags of
coffee had been exported at N80 per bag and export duty of 20% on invoice price and selling
expenses of N360 had been paid. The customer Mohammed, Mujeeb, Mutoleeb ltd accepted a
bill at four months in settlement. With the account sales, Fine-Fine Product ltd sent a cheque for
the balance shown to be due.
On 3rd October, Eleyele received a further account sale made up to 30 th September and this
showed that 20 bags had been sold at N80 per bag and the balance at N75 and that N150 had
been incurred by the way of selling expenses. A cheque for the balance due was sent with the
account sales.
The local bill of exchange matured and was met by the company’s bank in Bidad hometown.
Mohammed, Mujeeb, Mutoleeb ltd was declared bankrupt and a first and final dividend of 85
kobo in the naira was recovered on 31st October,2023.
You are required to show
a. The entries relating to the above consignment in the book of Eleyele and balance the
account as at 3rd October,2023.
b. In the book of Fine-Fine Product limited
i. The consignor’s account (Eleyele’s Account)
ii. The consignment receivable account (Mohammed, Mujeeb, Mutoleeb Account).