Consignment Account – SS3 Financial Accounting Lesson Note (Second Term)

A consignment account is the record kept of goods sent by a consignor (the principal) to a consignee (the agent), who agrees to sell them on the owner’s behalf. The consignee takes responsibility for the goods until they are sold and receives a commission. Both parties keep separate records of the consignment.

Behavioural objectives

By the end of the lesson, students should be able to:

1. Explain the meaning of consignment account.
2. List and explain some terminologies in the consignment account.

Instructional techniques

• Identification
• Explanation
• Questions and answers
• Demonstration
• Videos from source

Instructional materials

• Videos
• Loudspeaker
• Textbook
• Pictures

What is a consignment account?

Consignment of goods is concerned with the sending of goods by the consignor to the consignee, who agrees to sell them on behalf of the owner. The recording of such transactions is called consignment accounts.

What are the characteristics of a consignment account?

The main features of a consignment account are as follows:

1. Goods that are being sold on consignment are described as goods on consignment.
2. The arrangement involves the appointment of an agent whose responsibility is to sell the principal’s goods consigned to him.
3. The parties involved in this arrangement are the agent (consignee) and the principal (consignor).
4. The appointed agent has to take responsibility for the goods until they are sold.
5. The agent (consignee) receives a commission from the principal (consignor) for his work.
6. If the agent agrees to indemnify the consignor against any bad debts arising from the sales made by the consignee, he is paid a special commission called del credere commission.
7. All the parties involved are expected to keep independent accounting records relating to the consignment of goods.
8. Any goods held by the consignee are described and treated as stock of goods belonging to the consignor.

What are the terms used in consignment accounts?

Evaluation

1. Explain the meaning of consignment account.
2. List and explain some terminologies in the consignment account.

Classwork

As in the evaluation. The teacher commends the students positively.

Assignment

1. State any four characteristics of a consignment account.
2. Explain del credere commission and pro-forma invoice.