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Financial Accounting · Consignment

Commission, Del Credere and Overriding Commission in Consignment

Updated 10 October 2026 · Fact-checked

Commission is the consignee's reward for selling goods. Ordinary commission is a percentage of sales. Del Credere commission is extra, paid because the consignee bears bad debts on credit sales, and is normally on credit sales. Overriding commission is extra, usually on sales above invoice price or a target. Always use the base the question names.

Understand Commission, Del Credere and Overriding Commission

A consignee sells goods on behalf of the consignor and is paid commission. It is a revenue expense of the consignment, so it is charged to the Consignment Account. The consignee earns it on sales, not on goods merely received.

Ordinary commission is usually a percentage of gross sales value, including credit sales. Read the base carefully. It may be on total sales, on cash sales only, on invoice price, or on net proceeds after deducting expenses.

Del Credere commission is an extra commission. In return the consignee guarantees the consignor against loss from customers who do not pay. So the consignee bears all bad debts. The consignor does not record bad debts in the Consignment Account. Because the risk arises only on credit sales, del credere commission is normally calculated on credit sales. If the question says it is on total sales (cash plus credit), use total sales. Always follow the base the question gives.

Overriding commission is a further commission, usually paid to encourage the consignee to get a better price or push higher sales. It is usually a percentage of the excess of actual sales over the invoice price (or over a stated target). Some questions state a different base, such as total sales. Use the base the question states.

Without del credere, the consignee does not bear bad debts. The consignor bears them and charges them to the Consignment Account. The consignee only collects what customers pay. This is the key difference to check in every problem.

Key rules to remember

Ordinary commission on sales
Commission = Total sales × Commission rate ÷ 100
Use the base the question states: total sales, cash sales, or invoice price sales.
Commission on net proceeds
Commission = (Sales − Expenses deducted) × Rate ÷ 100
Only when the question says commission is on net proceeds. Deduct the stated expenses first.
Commission on net amount after charging commission itself
Commission = (Amount before commission) × Rate ÷ (100 + Rate)
Use when the rate applies to the amount left after the commission is deducted. Illustration: amount before commission ₹1,05,000, rate 5%. Commission = 1,05,000 × 5 ÷ 105 = ₹5,000. Net amount = ₹1,00,000, and 5% of ₹1,00,000 = ₹5,000, which confirms the result.
Del Credere commission
Del Credere = Credit sales × DC rate ÷ 100
Normally on credit sales. If the question says total sales, use total sales (cash + credit). The consignee then bears bad debts.
Overriding commission
Overriding = (Actual sales − Invoice price or stated target) × Rate ÷ 100
Usually on the excess of actual sales over invoice price (or the stated target). If the question names another base, such as total sales, use that.
Total commission
Total = Ordinary + Del Credere + Overriding
Debit Consignment Account with the total, each shown separately.
Bad debts rule
With del credere: bad debts borne by consignee. Without it: bad debts borne by consignor.
Bad debts are a Consignment Account debit only when there is no del credere commission.

How to solve Commission, Del Credere and Overriding Commission questions

Follow this order for any commission problem. It keeps the base and the bad debt treatment clear.

  1. 1Find total sales: cash sales plus credit sales. Note any sales returns.
  2. 2Read the commission terms. List ordinary, del credere and overriding rates, each with its base.
  3. 3Check the bad debt wording. Decide who bears it: the consignee if del credere applies, otherwise the consignor.
  4. 4Calculate each commission separately on its own base. Del credere is normally on credit sales, and overriding is usually on the excess of sales over invoice price or target, unless the question states otherwise. Do not combine rates unless all bases are the same.
  5. 5Handle cases where the commission is on net proceeds or on an amount after commission, using the matching formula.
  6. 6Debit the Consignment Account with commission and, if there is no del credere, with bad debts.
  7. 7Prepare the Consignee's Account or the Account Sales to show sales, expenses, commission and the balance due.
  8. 8Find the Consignment profit and show a neat working for every commission figure.

Quickest way: Quick commission table

When to use it: Use when a question gives sales, several commission types and bad debts, and you need the Consignment Account fast.

  1. Write the total sales figure and the credit sales figure at the top of the page.
  2. List each commission in a small three-line box: rate, base, amount.
  3. Tick whether del credere is given. If yes, strike bad debts out of the Consignment Account. If no, add it.
  4. Add the commissions into one total and post it to the Consignment Account.
  5. Check: Consignee's remittance equals sales less expenses and commission, adjusted for debtors outstanding.

Common mistakes in Commission, Del Credere and Overriding Commission

  • Charging bad debts to the Consignment Account even when del credere commission is given.

    Bad debts are a familiar expense, and students enter them automatically.

    Fix: Tick the del credere line first. If present, the loss belongs to the consignee and nothing is recorded by the consignor.

  • Applying del credere commission to the wrong base.

    Students apply the ordinary commission base to every commission, or ignore the base wording in the question.

    Fix: Use credit sales unless the question states total sales. Underline the base in the question and write it in the working before calculating.

  • Calculating overriding commission on the wrong base.

    The wording, such as sales above invoice price, is read quickly.

    Fix: Underline the base in the question and write it in the working. Usually it is the excess of actual sales over invoice price or the stated target.

  • Applying the rate to the sale amount when commission is on net proceeds.

    Students ignore the phrase 'net proceeds'.

    Fix: Deduct the stated expenses from sales first, then apply the rate to that figure.

  • Treating commission as a reduction of sales instead of an expense of the consignment.

    Commission is deducted by the consignee, so it feels like a sales adjustment.

    Fix: Show sales on the credit side and commission on the debit side of the Consignment Account.

  • Using Rate ÷ 100 on the amount before commission when the rate applies to the net amount after commission.

    The idea that commission is a percentage of the amount left after the commission itself is missed.

    Fix: Use Amount before commission × Rate ÷ (100 + Rate). Check that the commission equals the rate applied to the amount before commission less the commission.

Worked examples

Example 1

Rohan Traders of Pune consigned goods to Mehta & Co. of Nagpur. Total sales were ₹4,00,000, of which ₹1,00,000 were on credit. Bad debts were ₹6,000. Mehta & Co. gets 5% ordinary commission on total sales and 2% del credere commission on credit sales. Calculate the total commission and state who bears the bad debts.

Show the solution
  1. Total sales = ₹4,00,000. Credit sales = ₹1,00,000.
  2. Ordinary commission = 4,00,000 × 5 ÷ 100 = ₹20,000.
  3. Del credere commission = 1,00,000 × 2 ÷ 100 = ₹2,000.
  4. Total commission = 20,000 + 2,000 = ₹22,000.
  5. Because del credere is given, the consignee bears the bad debts of ₹6,000.
  6. Rohan Traders does not record the bad debts in the Consignment Account.

Answer: Total commission is ₹22,000 (ordinary ₹20,000 plus del credere ₹2,000). The consignee, Mehta & Co., bears the ₹6,000 bad debts.

Example 2

Sharma Exports consigned goods to Iyer Agency of Chennai. The goods sold had an invoice price of ₹3,00,000 and were sold for ₹3,60,000. Iyer Agency gets 4% ordinary commission on sales, and an overriding commission of 10% on the excess of actual sales over the invoice price of the goods sold. No del credere is given. Bad debts were ₹5,000. Find the total commission and the amount debited to the Consignment Account for commission and bad debts.

Show the solution
  1. Ordinary commission = 3,60,000 × 4 ÷ 100 = ₹14,400.
  2. Excess of sales over invoice price = 3,60,000 − 3,00,000 = ₹60,000.
  3. Overriding commission = 60,000 × 10 ÷ 100 = ₹6,000.
  4. Total commission = 14,400 + 6,000 = ₹20,400.
  5. No del credere is given, so the consignor bears the bad debts of ₹5,000.
  6. Consignment Account debit for commission and bad debts = 20,400 + 5,000 = ₹25,400.

Answer: Total commission is ₹20,400 (ordinary ₹14,400 plus overriding ₹6,000). Bad debts of ₹5,000 are borne by the consignor, so ₹25,400 is debited to the Consignment Account.

Exam tips

  • Underline the base of every commission in the question before you calculate.
  • Always show separate workings for ordinary, del credere and overriding commission to earn step marks.
  • Check for del credere before posting bad debts. This is the most common trap in MCQs.
  • In MCQs, test the answer by recomputing commission on the stated base. Options often use the wrong base.
  • Show the Consignee's Account or the Account Sales neatly. Examiners reward a clear layout.

Practice questions from Consignment

Commission, Del Credere and Overriding Commission in other exams

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

Commission, Del Credere and Overriding Commission: frequently asked questions

Who bears bad debts in consignment?

If the consignee receives del credere commission, the consignee bears the bad debts. If no del credere is given, the consignor bears them and debits them to the Consignment Account.

On what is del credere commission calculated?

It is normally calculated on credit sales, because the consignee bears the risk only on credit sales. If the question says it is on total sales, use total sales. Always follow the base the question gives.

What is overriding commission?

It is an extra commission paid to the consignee to encourage better prices or higher sales. It is usually a percentage of the excess of actual sales over the invoice price or a stated target. If the question names another base, use that.

How do I calculate commission on net proceeds?

Deduct the stated expenses from sales first. Then apply the commission rate to the remaining amount. Read the question to see which expenses are deducted.