CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment
In the books of the consignor, which entry records the commission earned by the consignee on goods sold on consignment?
The consignor debits Consignment Account and credits Consignee Account. Commission is a charge on the consignment, reducing its profit, while crediting the consignee reduces the amount he owes the consignor. Reversing these would wrongly raise the consignee's balance.
- ADebit Consignee Account, Credit Consignment Account
- BDebit Consignment Account, Credit Consignee AccountCorrect
- CDebit Commission Account, Credit Consignee Account
- DDebit Consignment Account, Credit Bank Account
Explanation
Commission is an expense of the consignment, so Consignment Account is debited. The consignee has earned it and it reduces the amount he owes, so the Consignee Account is credited. The reverse entry would inflate the amount due from the consignee.
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