BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -In the books of the consignor, the expenses incurred by the consignor should be debited to consignment account. These expenses have been incurred by the consignor in direct relation with the consignment. Hence, it is only correct to record them in the consignment account on account of consignment expenses.

Detailed explanation-2: -The consignee may incur expenses like Octroi duties, unloading charges, godown rent, insurance for storage, delivery charges etc., in relation to consignment. These expenses may have been paid in cash or by cheque or might be still unpaid.

Detailed explanation-3: -Consignee passes entry only when he sends advance to the consignor, makes a sale, incurs expenses on consignment and earns commission. He debits or credits consignor’s account for these items. However, when del-credere commission is given to him, bad debts are debited to commission account or Profit and Loss account.

Detailed explanation-4: -A consignor is an individual or party that brings a good to be sold on their behalf by another party, which is called the consignee. The consignee acts as a sort of middleman, which is the individual that buys or retains the goods and passes them along to a third party or the final buyer.

Detailed explanation-5: -The goods are sold on owner’s risk and hence, profit/loss goes to owner. Consignee only gets re-imbursement of expenses incurred by him and commission on sale made by him, because sale that proceeds, belongs to owner (consignor).