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Fundamentals of Financial and Cost Accounting · Consignment

Commission and Consignee Account Statements in Consignment

Updated 10 October 2026 · Fact-checked

Consignee commission is the consignee's reward for selling goods. Ordinary commission is a percentage of sales. Del credere commission is extra, for bearing bad debts. Overriding commission is extra, on sales above a target. The account sales is the consignee's statement to the consignor showing sales, expenses, commission and the net amount due.

Understand Commission and Consignee Account Statements

In consignment, the consignor sends goods to the consignee, who sells them for the consignor. The goods stay the consignor's property. The consignee earns commission for the service.

There are three kinds of commission. Ordinary commission is the basic pay, usually a percentage of sales. Del credere commission is an extra percentage paid because the consignee takes the risk of bad debts on credit sales. If a customer does not pay, the consignee bears the loss and the consignor still pays the del credere commission. Overriding commission is an extra percentage paid to push sales above the normal price or above a set target. Its base is whatever the question states: either total sales, or the excess of sales over the invoice price or target.

The base matters most. Ordinary commission is normally on gross sales (cash plus credit) unless the question says otherwise. Del credere commission is calculated on the base stated in the question, either total sales or credit sales. If the question is silent, total sales is usually taken. Keep this separate from ordinary commission, which has its own base. Without del credere, bad debts are the consignor's loss. With del credere, the consignee bears them, and you do not charge bad debts to the consignment account.

The account sales is the statement the consignee sends to the consignor. It shows sales (gross sales, less bad debts if there is no del credere), less expenses paid by the consignee, less commission, less any advance the consignee paid to the consignor, giving the net amount payable by the consignee. It is settled by a bank draft or cash. Its balance is what the consignee owes the consignor.

Some questions give commission on a different base. One example is commission on the invoice price. Another is commission of x% on net proceeds after deducting the commission itself. In that second case, the commission is part of what it is calculated on, so use the special formula below. Read the base twice before calculating.

Key formulas to remember

Ordinary commission
Ordinary commission = Total sales × commission rate
Total sales means cash and credit sales together, unless the question states another base.
Del credere commission
Del credere commission = Stated base (total sales or credit sales) × del credere rate
Use the base the question states. If the question is silent, total sales is usually taken. The consignee bears the bad debts.
Overriding commission
Overriding commission = Stated base × overriding rate
The base is whatever the question states. If it is on the excess, the base is (Actual sales − Invoice price or target sales). If it is on total sales, the base is total sales.
Commission on net proceeds
Commission = x ÷ (100 + x) × (Sales − other expenses)
Use only when commission is x% of the net proceeds after deducting the commission itself. Example: sales ₹1,21,000, other expenses ₹11,000, commission 10% on net proceeds after charging commission. Commission = 10 ÷ 110 × ₹1,10,000 = ₹10,000. Check: ₹1,10,000 − ₹10,000 = ₹1,00,000, and 10% of that is ₹10,000. Do not use this formula for the ordinary case of commission on gross sales. There, simply multiply sales by the rate.
Net amount due from consignee
Amount due = Sales realised − Expenses paid by consignee − Commission − Advance paid by consignee
Sales realised means cash sales plus credit sales actually collected. With del credere, the consignee bears bad debts and remits the full credit sales, so all sales count as realised and bad debts do not reduce the amount due. Without del credere, bad debts are the consignor's loss: deduct the uncollected debts from sales, because the consignee does not receive that money and cannot remit it. Commission is still worked out on its stated base, usually total sales.

How to solve Commission and Consignee Account Statements questions

Use this method for any commission or account sales question.

  1. 1Read the commission terms: ordinary rate, del credere rate, overriding rate and the base for each.
  2. 2Find total sales, split into cash and credit if the base needs it.
  3. 3Compute each commission separately on its stated base.
  4. 4Check who bears bad debts. If del credere is given, the consignee bears them. If not, the consignor bears them and it goes to the consignment account.
  5. 5List consignee's expenses and any advance or bills accepted.
  6. 6Prepare the account sales: Sales realised (gross sales, less any bad debts if there is no del credere) less expenses, less commission, less advance, equals net amount due.
  7. 7Post commission and expenses to the consignment account and the net balance to the consignee account.

Quickest way: Base-first quick calculation

When to use it: Use when the question asks only for the commission amount or the net amount payable by the consignee.

  1. Underline the base words: total sales, credit sales, excess over invoice price.
  2. Write each commission as sales × rate, one line each.
  3. Add all commissions, then deduct from sales with consignee's expenses and advance.
  4. Eliminate options that use the wrong base, such as credit sales when total sales is stated.
  5. Check that the answer is less than gross sales and sensible.

Common mistakes in Commission and Consignee Account Statements

  • Calculating ordinary commission on credit sales only when the question gives no such base.

    Students link del credere with credit sales and use that base for every commission.

    Fix: Use total sales for ordinary commission unless the question names another base. Del credere follows the base the question states. If it is silent, total sales is usually taken.

  • Charging bad debts to the consignment account despite del credere commission.

    Students forget del credere shifts the bad debt risk to the consignee.

    Fix: With del credere, ignore bad debts in the consignor's books. Without it, charge them to the consignment account.

  • Computing overriding commission on total sales instead of the excess.

    Students skip the phrase 'on excess over invoice price'.

    Fix: Subtract the target or invoice price first when the question says excess.

  • Deducting the advance from sales before computing commission.

    Students mix up the commission base with the amount due.

    Fix: Commission is on sales. Deduct the advance only when finding the final amount payable.

  • Treating account sales as the consignor's statement.

    The names sound similar.

    Fix: Remember that the consignee prepares the account sales and sends it to the consignor.

Worked examples

Example 1

Anand of Delhi consigned goods to Bhavesh of Pune. Bhavesh sold goods for ₹2,00,000 (₹1,20,000 cash, ₹80,000 credit, of which ₹5,000 proved bad). Commission is 5% ordinary plus 2% del credere on total sales. Bhavesh paid expenses of ₹6,000 and had earlier paid an advance of ₹30,000 to Anand. Find the net amount payable by Bhavesh.

Show the solution
  1. Del credere applies, so Bhavesh bears the ₹5,000 bad debt and remits the full ₹2,00,000, including the ₹80,000 credit sales. The bad debt does not reduce the amount payable.
  2. Ordinary commission = ₹2,00,000 × 5% = ₹10,000.
  3. Del credere commission = ₹2,00,000 × 2% = ₹4,000.
  4. Total commission = ₹14,000.
  5. Deductions = expenses ₹6,000 + commission ₹14,000 + advance already paid to Anand ₹30,000 = ₹50,000.
  6. Net amount payable = ₹2,00,000 − ₹50,000 = ₹1,50,000.

Answer: Bhavesh pays ₹1,50,000 to Anand. The ₹5,000 bad debt is Bhavesh's loss and does not change this amount.

Example 2

Meera consigned goods invoiced at ₹1,00,000 to Rahul. Rahul sold them for ₹1,40,000. Commission is 4% on total sales plus overriding commission of 10% on sales above invoice price. Find the total commission.

Show the solution
  1. Ordinary commission = ₹1,40,000 × 4% = ₹5,600.
  2. Excess of sales over invoice price = ₹1,40,000 − ₹1,00,000 = ₹40,000.
  3. Overriding commission = ₹40,000 × 10% = ₹4,000.
  4. Total commission = ₹5,600 + ₹4,000 = ₹9,600.

Answer: Total commission is ₹9,600.

Example 3

Kiran consigned goods to Lata. Lata sold them for ₹1,21,000 and paid other expenses of ₹11,000. Her commission is 10% of net proceeds after deducting the commission itself. Find the commission.

Show the solution
  1. The base includes the commission, so use x ÷ (100 + x) × (Sales − other expenses).
  2. Sales − other expenses = ₹1,21,000 − ₹11,000 = ₹1,10,000.
  3. Commission = 10 ÷ 110 × ₹1,10,000 = ₹10,000.
  4. Check: ₹1,10,000 − ₹10,000 = ₹1,00,000, and 10% of ₹1,00,000 = ₹10,000.

Answer: Commission is ₹10,000.

Exam tips

  • Circle the base for each commission before calculating. Most wrong options use the wrong base.
  • If del credere is given, ignore bad debts in the consignment account.
  • Check whether the question asks for commission, net amount due, or the consignment profit. They differ.
  • Remember that no negative marking applies, so attempt every question and eliminate wrong bases first.

Practice questions from Consignment

Commission and Consignee Account Statements in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Commission and Consignee Account Statements: frequently asked questions

What is overriding commission in consignment?

It is an extra commission paid to the consignee for selling above a target or above the invoice price. It encourages higher sales. The base is whatever the question states: total sales, or the excess over the invoice price or target.

What is the difference between ordinary and del credere commission?

Ordinary commission is the basic pay for selling the goods. Del credere commission is extra pay because the consignee bears the loss from customers who do not pay. Only del credere shifts bad debts to the consignee.

On what is consignee commission calculated?

Ordinary commission is normally on total sales, cash and credit. Questions sometimes state another base such as credit sales or the excess over a target. Del credere follows its stated base, and total sales is usually taken if the question is silent.

What is an account sales?

It is the statement prepared by the consignee for the consignor. It shows gross sales, expenses, commission, advance and the net amount payable.