Account Sales

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How long does this relationship exist?

The relationship between the consignor and the consignee once it has begun would continue till they think of severing ties with one another. This is an ongoing relationship.

Where do the transactions take place?

The transactions relating to the consignment in total take place both at the place of the consignor as well as that of the consignee. Transactions relating to sending goods and the related aspects happen at the place of the consignor and the transactions relating to the sale of the goods happen at the place of the consignee.

Who Needs all the information on Consignment

The consignor is the risk bearer of the business. He is the person who has to decided about many different aspects relating to the business based on the information relating to the business. He needs to know everything relating to the business i.e. about the transactions that take place at his place as well as transactions that take place at the consignees place.

The consignee being just an agent, would not be interested in the total information of the business. He would be interested only in those transactions where he has to either receive or give the consignor. Therefore he would not be bothered about many of the transactions that take place at the consignors place.

How does the Consignor know about the Transactions at the Consignees place?

The consignor needs to know what is happening at the other end. The consignee also needs to know some information from the consignor.

The information can be arranged to be passed on from the consignee to the consignor and vice versa at a frequency that would be convenient to both. It may not be practical to think in terms of letting the other know immediately on a transaction taking place at one end.

The transactions taking place at the consignors place have very little accounting relevance to the consignee. But the transactions taking place at the consignees place are very important from the accounting point of view to the consignor. Therefore a system has been designed to provide for transfer of this information from the "Consignee to the Consignor" at a frequency agreed upon between them. This information is passed on by the consignee to the consignor in the form of a statement called "Account Sales".

Account Sales

An account sales is a statement of affairs relating to the consignment. This is a statement prepared and sent by the consignee to the consignor to keep him informed of the transactions of the business. It is a periodic statement i.e. it is made for a certain period with a starting date and an ending date. The details in the account sales form a basis for accounting for the transactions at the consignees end.

Therefore, whenever we work out a problem on consignment accounting, we prepare an "Account Sales" if it is not given in the problem (which would be the case in majority of the problems).

The statement carries a heading to indicate the period relevant to the data in the statement.

Account Sales as sent to "the consignor" by "the consignee" for the sales made on consignment

  • for the period from _____ to _____.
  • for the three months ending 31st March 2005.

The wording of the heading may vary giving the same sense.

Account Sales as received from M/s Maruthi Traders of Vijayawada
For the sales made on consignment for the period from ____ to _____
Particulars Amount
(in Rs)
(in Rs)
(in Rs)
Gross Sale Proceeds:      
Cash Sales      
1. xx    
2. xx xxxx  
Credit Sales      
1. xx    
2. xx xxxx  
Total Sale Proceeds   xxxx  
Other Receipts [Note (1)]      
1. xx    
2. xx xxxx  
Total Receipts     xxxx
Less: Amounts to be deducted      
Advances Sent [Note(2)]      
1. xx    
2. xx xxxx  
Expenses paid to be reimbursed [Note(3)]      
1. xx    
2. xx xxxx  
Commissions receivable [Note(3)]      
1. xx    
2. xx xxxx  
Total Deductions     xxxx
Gross Amount Due     xxxx
Less: Bad Debts (Consignor's responsibility) [(4)]     xxxx
Net Amount Due     xxxx
Less: Amounts still to be collected [(5)]
(Balance due from Consignment Debtors)
Cash Due     xxxx
Less: Amounts sent (along with a/c sales)     xxxx
Net Cash Due     xxxx


  1. Other Receipts

    The amount to be paid by the consignee may include the amounts received on account of sale of abnormal loss stocks, insurance realisations and sale of salvaged stock. These realisations would not form revenue for consignment business. Therefore, they cannot be included in the normal sale proceeds. However since the consignee has to account for these realisations also he includes them in the account sales.
  2. Advances Sent

    The consignee may have sent advances to the consignee at the time when goods have been consigned. These advances may be in the form of cash, cheques, bills (Bills Receivable to the consignor or Bills payable to the consignee), etc.
  3. Expenses Paid to be Reimbursed

    Unless there is an agreement to the contrary, the consignor has to bear all the expenses of the consignment. However during the course of conduct of affairs the consignee may have to spend cash towards expenses in relation to the consigned goods. These expenses will be subsequently reimbursed by the consignor to the consignee. Therefore the consignee deducts these from the sale realisations and sends the remaining amounts to the consignor.
  4. Commissions Receivable

    The consignee may be entitled to one or more types of commissions. All these are collected from the sale proceed of consignment goods. Therefore the sale proceeds to be paid to the consignor would be the ones remaining after deducting the commission from them.
  5. Bad Debts

    "Gross Sale Proceeds" includes all sales made. This gets into the Total receipts from which the amounts due to the consignee are deducted.

    Where the bad debts are to be borne by the consignor, the sale proceeds representing the sales made to the consignment debtors who did not pay up would become unrealisable. Therefore they have to be eliminated from the Sale proceeds realisable by the consignor. Therefore they are deducted here which in effect would amount to deducting from the gross sale proceeds.

    If the consignee has to bear the bad debt loss (in case where he is being given the del credere commission) such a deduction cannot be made since the amount is to be given by the consignee and he cannot reduce the amounts due saying someone did not pay up.

  6. Amounts still to be collected

    The amount due to be received by the consignor would be the amount left over after setting off the advances, commissions, expenses to be reimbursed, from the total receipts. The total receipts includes both cash receipts as well as collections in relation to credit sales. This implies that the Net amount due to be sent to the consignor may not be available with the consignee in cash.

    This can be assessed from the balance due from the consignment debtors. The balance in the consignment debtors account is surely sale proceeds not yet realised in cash. The consignee will be able to send cash to the consignor only after he receives it. Therefore, the cash due can be arrived at by deducting that much amount of cash that has not yet been collected. The consignee is obliged to pay up this amount to the consignor and if at all he sends only a part of it, the remaining can be identified as cash due.

Consignee collects his dues first

If you notice the working in the account sales, you will be able to ascertain that the consignee is paying cash to the consignor only after he has collected it from the consignment debtors. From the initial sale proceeds he would be recovering the advances he paid, the expenses he paid, the commission due to him (on all sales). If there is any amount remaining after this, and that too if it is not locked up in consignment debtors only he would be paying the consignor.
  • Say for example,
    1. The consignee has made a cash sale of Rs. 10,000, a credit sale of Rs. 90,000.

      If you calculate in the order shown in account sales then, Gross Sale Proceeds/Total Sale Proceeds/Total Receipts would be Rs. 1,00,000.

    2. He is entitled to a commission of 10% on sales. He has spent Rs. 5,000 towards expenses.
    3. He has already sent Rs. 25,000 as advance at the time of receiving the goods on consignment.

    Deductions would be 40,000 (10,000+ 5,000 + 25,000).

    Gross amount due would be Rs. 60,000 (1,00,000 - 40,000).

    Since there is no bad debts this would be the Net amount due. The consignee would have to send Rs. 60,000 to the consignor.

  • Say, his collections are:
    1. Only Rs. 10,000 has been collected from the consignment debtors i.e. Rs. 80,000 cash (pertaining to sale proceeds) is still locked up with the consignment debtors.

The consignee, though he has to send Rs. 60,000 would tell the consignor that he has not realised the sale proceeds in cash yet and therefore would not be in a position to send any cash.

This can be understood from the fact that the consignment debtors are still due to the extent of Rs. 80,000 (90,000 − 10,000). If we deduct the amount still to be received from the consignment debtors, the Cash due would be a negative figure − 20,000 (60,000 − 80,000). This implies that the consignor would not be paid even from the next Rs. 20,000 cash realisations. He will be paid only when the cash realisations exceed Rs. 20,000 from hereon.

What happens to the first Rs. 20,000 realised?
They get adjusted to the amounts due to the consignee himself. The total due to consignee is Rs. 40,000 and he has recovered only Rs. 20,000 (Rs. 10,000 cash sale and Rs. 10,000 as collection from consignment debtors) of that. The first 20,000 collected from hereon would be towards his remaining dues.

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