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Financial Accounting · Consignment

Consignment Accounting in Books of Consignor and Consignee

Updated 10 October 2026 · Fact-checked

In consignment, the consignor sends goods to the consignee, who sells them as an agent. The consignor keeps ownership and records goods sent, expenses, stock and profit in a Consignment Account. The consignee records only expenses, sales and commission, then remits the balance with an Account Sales. Solve by posting each item in order.

Understand Accounting Treatment in Books of Consignor and Consignee

In a consignment, one person (the consignor) sends goods to another (the consignee) to sell on the consignor's behalf. The consignee is only an agent. Ownership stays with the consignor until the goods are sold to a customer. So goods sent are not a sale for the consignor, and they are not a purchase for the consignee.

The consignor tracks the result of each consignment through a Consignment Account. It works like a trading and profit account for that one shipment. Debit side: goods sent, expenses paid by the consignor, expenses paid by the consignee, and commission. Credit side: sales proceeds (as reported by the consignee) and closing stock with the consignee. The balancing figure is profit or loss, transferred to the Profit and Loss Account.

The consignee does not record the goods as stock in the main books. Goods are not his asset. He only records what he spends and earns for the consignor, and what he owes the consignor. The consignor keeps a Consignee's Personal Account in his ledger, showing the amount owed by or to the consignee.

The consignee sends an Account Sales periodically. It lists sales, expenses he paid, commission, any advance or bills accepted, and the net amount due. This is the document you use for entries in the consignor's books.

Two points often decide marks. First, expenses up to reaching the consignee's godown (freight, insurance in transit) are part of the cost of goods and are included in the valuation of closing stock. Second, expenses after that (selling, godown rent) are not included in stock valuation. Goods sent is normally shown at cost, though it may be shown at invoice price in some questions. That case is treated separately.

Key rules to remember

Goods sent on consignment (consignor)
Consignment A/c Dr. ; To Goods Sent on Consignment A/c
Record at cost. At year end, Goods Sent on Consignment A/c is credited to Trading A/c, or deducted from Purchases.
Expenses paid by consignor
Consignment A/c Dr. ; To Cash/Bank A/c
Applies to freight, insurance, cartage and loading paid by the consignor.
Expenses paid by consignee
Consignment A/c Dr. ; To Consignee's Personal A/c
Applies to expenses reported on the Account Sales.
Sales by consignee
Consignee's Personal A/c Dr. ; To Consignment A/c
Applies to both cash and credit sales, as reported by consignee.
Commission
Consignment A/c Dr. ; To Consignee's Personal A/c
Commission is a consignment expense for the consignor.
Remittance by consignee
Cash/Bank A/c Dr. ; To Consignee's Personal A/c
Reduces the amount the consignee owes. An advance or bill accepted is entered in the same way.
Closing stock with consignee
Stock on Consignment A/c Dr. ; To Consignment A/c
Value = cost of unsold goods + proportionate direct (up to godown) expenses. Exclude selling expenses.
Profit or loss on consignment
Credit side total − Debit side total (Consignment A/c)
If credits exceed debits, transfer profit to Profit and Loss A/c: Consignment A/c Dr. ; To Profit and Loss A/c. For a loss, reverse the entry.
Consignee's entries
Expenses paid: Consignor's A/c Dr. ; To Cash A/c. Sales: Cash/Debtors Dr. ; To Consignor's A/c. Commission earned: Consignor's A/c Dr. ; To Commission A/c.
These are three separate entries in the consignee's books. The consignee debits Consignor's A/c for expenses and for commission, and credits it for sales.

How to solve Accounting Treatment in Books of Consignor and Consignee questions

Use the same order for every consignment question. Decide first whose books you are writing, then post item by item.

  1. 1Read the question and note whose books are required: consignor, consignee, or both.
  2. 2List the transactions in date order: goods sent, expenses, sales, commission, remittances, stock.
  3. 3Open the Consignment A/c (consignor's books) and Consignee's Personal A/c, and pass each journal entry.
  4. 4Separate direct expenses (up to the consignee's godown) from selling expenses.
  5. 5Compute closing stock: unsold units × (cost per unit + direct expenses per unit).
  6. 6Put closing stock on the credit side of the Consignment A/c and find the balancing figure as profit or loss.
  7. 7Transfer profit or loss to Profit and Loss A/c and find the balance in the Consignee's Personal A/c.
  8. 8For the consignee's books, show only the Consignor's A/c, cash or debtors, expenses and Commission A/c. Do not show the goods as stock.

Quickest way: Single-Ledger Consignment Template

When to use it: Use it when the question asks only for the Consignment Account and profit, with no journal entries needed.

  1. Write the debit column: goods sent, consignor's expenses, consignee's expenses, commission.
  2. Write the credit column: sales and closing stock.
  3. Calculate closing stock by units: cost per unit plus freight per unit, times unsold units.
  4. Find the balancing figure and label it Profit or Loss transferred to Profit and Loss A/c.
  5. Check that total debits equal total credits.

Common mistakes in Accounting Treatment in Books of Consignor and Consignee

  • Treating goods sent as a sale and crediting Sales A/c.

    It looks like a normal transfer of goods, and students forget that title has not passed.

    Fix: Credit Goods Sent on Consignment A/c. Sales are recognised only when the consignee sells to a third party.

  • Including selling expenses in the value of closing stock.

    Students add every expense to stock without checking when it was incurred.

    Fix: Add only expenses up to the point where goods reach the consignee's godown, such as freight and transit insurance. Exclude godown rent, selling expenses and commission.

  • Valuing closing stock at cost alone, ignoring proportionate freight.

    Freight is entered as a lump sum and not linked to unsold units.

    Fix: Divide the direct expenses by units sent and apply the per-unit figure to the unsold units.

  • Recording consignee's expenses in the consignor's cash book.

    Students confuse who actually paid the expense.

    Fix: Credit the Consignee's Personal A/c, not cash, for expenses the consignee paid. Use cash only for what the consignor paid.

  • Showing consignment stock in the consignee's balance sheet.

    Goods are physically at the consignee's godown, so they look like his stock.

    Fix: The consignee does not own the goods. Show only the balance due to or from the consignor.

  • Missing the Account Sales figures when advance or bills are involved.

    Students overlook that an advance or an accepted bill reduces the amount due.

    Fix: Treat the advance, remittance or bill as a credit to the Consignee's A/c and subtract it when finding the closing balance.

Worked examples

Example 1

Rahul Traders, Delhi (consignor), sent 100 fans costing ₹2,000 each to Mehta & Sons, Jaipur, on consignment. Rahul paid freight ₹5,000 and insurance in transit ₹3,000. Mehta paid godown rent ₹4,000, and sold 80 fans at ₹2,800 each for cash. Mehta is entitled to commission of 5% on sales. Mehta remitted the balance due. Prepare the Consignment A/c and Mehta & Sons' A/c in the consignor's books, ignoring the Account Sales layout.

Show the solution
  1. Goods sent: 100 × ₹2,000 = ₹2,00,000.
  2. Direct expenses by consignor: ₹5,000 + ₹3,000 = ₹8,000. Rahul paid these in cash.
  3. Sales: 80 × ₹2,800 = ₹2,24,000. Commission 5% = ₹11,200.
  4. Closing stock: unsold 20 units. Cost per unit = ₹2,000 plus direct expenses ₹8,000 ÷ 100 = ₹80, so ₹2,080. Stock = 20 × ₹2,080 = ₹41,600. Godown rent ₹4,000 is excluded.
  5. Consignment A/c, debit side: Goods Sent ₹2,00,000; Freight and Insurance ₹8,000; Godown Rent ₹4,000; Commission ₹11,200. Total ₹2,23,200.
  6. Credit side: Sales ₹2,24,000; Closing Stock ₹41,600. Total ₹2,65,600.
  7. Profit on consignment = ₹2,65,600 − ₹2,23,200 = ₹42,400, transferred to Profit and Loss A/c.
  8. Mehta's A/c: Debit Sales ₹2,24,000. Credit godown rent ₹4,000 and commission ₹11,200. Balance due = ₹2,24,000 − ₹15,200 = ₹2,08,800, remitted. Closing balance is nil.

Answer: Profit on consignment is ₹42,400. Closing stock is ₹41,600. Mehta remitted ₹2,08,800.

Example 2

Using the data of Example 1, pass the journal entries in the books of Mehta & Sons (the consignee).

Show the solution
  1. Consignee records only what happens in his own books. Goods received on consignment are not shown as a purchase.
  2. Godown rent paid: Rahul Traders A/c Dr. ₹4,000; To Cash A/c ₹4,000.
  3. Sales made for cash: Cash A/c Dr. ₹2,24,000; To Rahul Traders A/c ₹2,24,000.
  4. Commission earned: Rahul Traders A/c Dr. ₹11,200; To Commission A/c ₹11,200. Commission = 5% × ₹2,24,000.
  5. Remittance: Rahul Traders A/c Dr. ₹2,08,800; To Cash A/c ₹2,08,800. This is ₹2,24,000 − ₹4,000 − ₹11,200.
  6. Check: Rahul Traders A/c has debits of ₹4,000 + ₹11,200 + ₹2,08,800 = ₹2,24,000 against the credit for sales of ₹2,24,000, so the balance is nil.
  7. Transfer Commission A/c ₹11,200 to Profit and Loss A/c at year end.

Answer: The consignee earns commission of ₹11,200 and remits ₹2,08,800. Rahul Traders' account closes with a nil balance.

Exam tips

  • Write the correct title: Consignment A/c in the Books of Consignor, and state the period.
  • Show the closing stock calculation as a working note. Step marks are usually given for it.
  • Label every item on the Consignment A/c as 'To' or 'By' and note who paid it.
  • In MCQs, check whether the question includes selling expenses in stock. The answer usually excludes them.
  • If the question mentions an advance or bill, adjust the Consignee's A/c before computing the final remittance.

Practice questions from Consignment

Accounting Treatment in Books of Consignor and Consignee: frequently asked questions

What is the journal entry for goods sent on consignment?

In the consignor's books, debit Consignment A/c and credit Goods Sent on Consignment A/c at cost. Goods Sent on Consignment A/c is later closed to Trading A/c or deducted from Purchases. No sale is recorded.

What is an Account Sales?

It is a statement sent by the consignee to the consignor. It lists sales, expenses paid, commission, and any advance, with the net amount due. The consignor uses it to pass entries in his books.

Are consignment expenses always added to stock?

No. Expenses incurred up to the consignee's godown, like freight and transit insurance, are added to the cost of unsold stock. Expenses after that, such as godown rent and selling expenses, are not.

Does the consignee record the goods in his books?

No. The goods belong to the consignor. The consignee records his expenses, sales, commission, and the balance he owes. Stock is not shown in his balance sheet.