CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment
In the consignor's books, the consignee's commission and expenses incurred by the consignee on the consignment are debited to which account?
They are debited to the Consignment Account, with the credit going to the consignee's account. Commission and consignee expenses are costs of the particular consignment, so they must reduce its profit and are not taken straight to the general Profit and Loss Account.
- AConsignee's Personal Account only
- BConsignment AccountCorrect
- CCommission Account
- DProfit and Loss Account directly
Explanation
These are expenses of the consignment, so they are debited to Consignment A/c and credited to the consignee's account. Taking them directly to Profit and Loss would leave the consignment profit wrongly stated.
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