Credit Sales Consignment Debtors :: Collection by the Consignee

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There are a number of possible scenarios for collection of the amounts due from the consignment debtors. The dues are collected in general by the Consignee. Theoretically it is also possible that the dues are collected by the Consignor.

Dues Collected by the Consignee

This is what happens in most of the cases.

The various modes in which the Consignee receives payments from the Consignment Debtors are:

  • in Cash

  • by Cheque

  • by Making the Consignment Debtor accept a Bill Receivable drawn

    The Consignee may settle the dues of the Consignment Debtors by making them accept a Bill Receivable drawn by him.
  • by Receving an Endorsed Bill Receivable from the Consignment Debtor

    In some cases the consignment debtor may also endorse a bill received by him from some other party to the Consignee. The Consignment Debtor is called the endorser and the Consignee the Endorsee.
    [Bill Receivable with the Consignment Debtor gets liquidated and the Consignee receives a Bill Receivable]

    In both the cases of a B/R being accepted by the Consignment Debtor as well as a B/R in his possession being endorsed by him, the consignee would get a B/R. The acceptor in the first instance being the consignment debtor himself and in the second instance being some one else.

  • by Transfering a Bill Payable or any other liability to the Consignment Debtor

    Transfering a Bill Payable or any other liability of the Consignee (Bill Payable getting created to the Consignment Debtor and Bill Payable getting liquidated to the Consignee)

12. June 24th: For the amount received by the Consignee from the Consignment Debtors
      (a) in Cash Rs. 40,000 from M/s Swaraj Traders,
      (b) By Cheque Rs. 50,000 from M/s Irfan Brothers,
      (c) By a Bill Receivable accepted by M/s Swaraj Traders Rs. 12,500,
      (d) By a Bill Receivable Endorsed by M/s Irfan Brothers Rs. 10,000 and
      (e) By M/s Swaraj Traders taking over the liability of the consignee (Bills Payable) Rs. 5000.

Consignor's Books Hide/Show

Accounts Effected by the Transaction » Identification & Analysis:

  • Debit »

    • 12 (a), (b), (c), (d), (e): M/s Maruthi Traders a/c

      From the moment the consignee receives such payment, he would be liable to the consignor in place of the consignment debtors. The person who owes us is our debtor. Therefore "Consignee a/c" is to be debited. Consignee is in the position of benefit receiver.
      ["Consignee a/c" – Personal a/c – Debit the benefit receiver ]
  • Credit »

    • 12 (a), (b), (c), (d), (e): Consignment Debtors a/c

      In all these transactions the dues from the consignment debtors are collected by the consignee. Whatever may be the mode of receiving the payment, these collections would reduce reduce the amount due to be paid by the consignment debtors. The Consignment Debtors a/c shows a debit balance (they being our debtors) indicating amounts receivable from them.

      Since payments made by them reduces the amount receivable from them, their account is to be credited. Alternatively, since the consignment debtors are the benefit givers they need to be credited.
      ["Consignment Debtors a/c" – Personal a/c – Credit the benefit giver]

The effect of the transactions can be summarised as
12(a) :(i) Consignee a/c and (ii) Consignment Debtors a/c
12(b) :(i) Consignee a/c and (ii) Consignment Debtors a/c
12(c) :(i) Consignee a/c and (ii) Consignment Debtors a/c
12(d) :(i) Consignee a/c and (ii) Consignment Debtors a/c
12(e) :(i) Consignee a/c and (ii) Consignment Debtors a/c

 
DrM/s Maruthi Traders a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

30/06/05
30/06/05
30/06/05
30/06/05
30/06/05
 

To Con. Dr a/c (12a)
To Con. Dr a/c (12b)
To Con. Dr a/c (12c)
To Con. Dr a/c (12d)
To Con. Dr a/c (12e)
 






 

40,000
50,000
12,500
10,000
5,000
 




DrConsignment Debtors a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




30/06/05
30/06/05
30/06/05
30/06/05
30/06/05
 

By M T a/c (12a)
By M T a/c (12b)
By M T a/c (12c)
By M T a/c (12d)
By M T a/c (12e)
 






 

40,000
50,000
12,500
10,000
5,000
 

Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 15th Dr
40,000
40,000
June 15th Dr
50,000
50,000
June 15th Dr
12,500
12,500
June 15th Dr
10,000
10,000
June 15th Dr
5,000
5,000

Alternative

Instead of repeating the same journal entry a number of times, a single journal entry for the total value of the amounts collected by the consignee may also be passed. In such a case, there will only be one ledger posting for all the amounts together.

Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 30th Dr
1,17,500
1,17,500

DrM/s Maruthi Traders a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

30/06/05
 

To Con. Dr a/c (12)
 


 

25,650
 




DrConsignment Debtors a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




30/06/05
 

By M T a/c (12)
 


 

1,17,500
 

Consignees Books Hide/Show

Accounts Effected by the Transaction » Identification & Analysis:

  • Credit »

    • 12 (a), (c), (e): Consignment Debtors a/c

      In these transactions, M/s Swaraj Traders, being the Consignment Debtors are clearing their dues. Hence their account which shows a debit balance is to be reduced by the amount M/s Swaraj Traders are the benefit givers here.
      [Consignment Debtors a/c – Personal a/c – Credit the benefit giver]
    • 12 (b), (d): Consignment Debtors a/c

      In these transactions, M/s Irfan Brothers, being the Consignment Debtors are clearing their dues. Hence their account which shows a debit balance is to be reduced by the amount M/s Irfan Brothers are the benefit givers here.
      [Consignment Debtors a/c – Personal a/c – Credit the benefit giver]
  • Debit »

    • 12 (a): Cash a/c

      Since cash is being received "Cash a/c" is debited
      [Cash a/c – Real a/c – Debit what comes in]
    • 12 (b): Bank a/c

      Since the money is getting into the bank account "Bank" is to be debited (Bank a/c is benefiting by receiving cash)
      [Bank a/c Personal a/c Debit the benefit receiver]
    • 12 (c), (d): Bills Receivable a/c

      When the Bill is accepted by the consignment Debtor and also when the Consignment Debtor endorses and transfers the bill receivable with him to the consignee, the consignee would receive a Bill Receivable. In the first bill the consignee being the drawer and in the second bill the consignee being the endorsee. Since the Bill receivable is getting in "Bills Receivable a/c" is debited
      [Bills Receivable a/c Real a/c Debit what comes in]
    • 12 (e): Bills Payable a/c

      When the Bill Payable with the consignee which is a liability is accepted to be taken over by the consignment debtor, it amounts to a liability in the name of "Bills Payable a/c" getting liquidated.

      Since the liability Bills Payable is being liquidates "Bills Payable a/c" is debited. The Bill Payable a/c being the benefit receiver here.
      [Bank a/c Personal a/c Debit the benefit receiver]

The effect of the transactions can be summarised as
12(a) :(i) Cash a/c and (ii) Consignment Debtors a/c
12(b) :(i) Bank a/c and (ii) Consignment Debtors a/c
12(c) :(i) Bills Receivable a/c and (ii) Consignment Debtors a/c
12(d) :(i) Bills Receivable a/c and (ii) Consignment Debtors a/c
12(e) :(i) Consignment Debtors a/c and (ii) Bills Payable a/c

 
DrM/s Swaraj Traders a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




24/06/05
24/06/05
24/06/05

By Cash (12a)
By B/R (12c)
By B/P (12e)
 




 

40,000
12,500
5,000
 

 
DrM/s Irfan Brothers a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




24/06/05
24/06/05
 

By Bank a/c (12b)
By B/R (12d)
 



 

50,000
10,000
 

 
DrBills Receivable a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

24/06/05
24/06/05
 

To M/s S T (12c)
To M/s I B (12d)
 



 

12,500
10,000
 




 
DrBills Payable a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

24/06/05
 

To M/s S T (12e)
 


 

5,000
 




 
Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 24th Dr
40,000
40,000
June 15th Dr
50,000
50,000
June 15th Dr
12,500
12,500
June 15th Dr
10,000
10,000
June 24th Dr
12,500
12,500

Alternative

Since in the first, third and the fifth entries the same account is credited, all the entries can be combined together to form a "Simple Compound/Combined Entry". Similarly the second and the fourth entries can be combined together to form another "Simple Compound/Combined Entry".

Simple Compound/Combined Entry

A simple compound/combined entry is an entry involving three or more elements/account heads and in which there are either multiple debits or multiple credits and not both. Learn more Here

 
Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 24th Dr
Dr
Dr



50,000
12,500
5,000



67,500
June 15th Dr
Dr


40,000
10,000


50,000

Note:

Combining the entries in case of the Consignor Books is different from Combining the entries in the Consignee Books. In the Consignor Books, all the entries are the same, therefore all of them are replaced with one entry with the total amount. The individual amounts will not be visible either in the Journal or in the ledger. This entry should not be called a compound entry.

However in case of the Consignee Books, two or more entries are replaced by a single compound entry. Here the individual amounts would be visible as in the case of writing "Simple Entries". The ledger postings would also be as they had been in case of writing Simple Entries.

Author Credit : The Edifier ... Continued Page 13

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