CMA Intermediate · Financial Accounting · Consignment
A consignor sends goods to a consignee on an agreed commission of 5% on sales plus a del credere commission of 2% on sales. What is the main effect of the del credere commission?
Del credere commission is an additional commission paid to the consignee in return for his taking on the risk of bad debts on credit sales. The consignee must bear any such loss, while the consignor need not record it in the consignment account.
- AThe consignee bears bad debts on credit sales made by himCorrect
- BThe consignor bears bad debts on credit sales
- CThe consignee guarantees the market price of the goods
- DThe consignee is relieved of his duty to account for sales
Explanation
Del credere commission is an extra commission paid to the consignee for guaranteeing the collection of credit sales. Bad debts therefore fall on the consignee, not the consignor. It has no bearing on price guarantees or on the duty to render account sales.
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