I want to know the accounting treatment for consignment stock. Please describe me the journal entries for a cyclus of transaction of consignment stock. Thanks.

At the time something is put on consignment, there aren't any entries. If I have something in my inventory and send it to you to sell on consignment, on the books there is no sale and I will keep in counted in my inventory. It's like nothing happened. Once you sell it, I record the normal sales entries.

At the time something is put on consignment, there aren't any entries. If I have something in my inventory and send it to you to sell on consignment, on the books there is no sale and I will keep in counted in my inventory. It's like nothing happened. Once you sell it, I record the normal sales entries.

I am afraaid I do not endorse this view.for the following reasons:
1. An event has taken place. Goods have left the premises of the sender (consignor) therefore the value of the physical inventory has reduced. The entry will be:
Debit Goods sent on consignment
Credit Inventory

2. Goods bow will be sold by the person to whom the goods have been sen (consignee). He will submit a period statement called Account Sale to inform the consignor about the number and value of units sold and balance in hand, if any. It will also show the expenses incurred by the consignee as well as his commission to acts as a consignee and remit the balance to the consignor. At this stage entries will be made by the consignor to record sales, expenses, commission and eliminate the stock out on consignment.

I would like you to please refer authentic text books and the International Accounting Standards. In this case, the applicable Standards are IAS 2 Inventories and IAS 18 Revenue

I am afraaid I do not endorse this view.for the following reasons:
1. An event has taken place. Goods have left the premises of the sender (consignor) therefore the value of the physical inventory has reduced. The entry will be:
Debit Goods sent on consignment
Credit Inventory

I'm going to disagree in return. Since you love Kieso so much, here's a quote from a Kieso intermediate book:
"Occasionally, and only for a significant amount, the consignor shows the inventory out on consignment as a separate item."

Now, as usually, I tend to go from the common way principals books teach the stuff. The vast, vast majority of questions here (not including cost) are from a principals class. You have yet to accept this concept, and don't even seem to recognize such as being the case. But even if I'm wrong and this isn't principals (which very likely is not separating the inventory cause they like to oversimplify everything), I'm quoting the above out of an intermediate book, by one of your favorite authors.

So how exactly can you tell me I'm wrong?


2. Goods bow will be sold by the person to whom the goods have been sen (consignee). He will submit a period statement called Account Sale to inform the consignor about the number and value of units sold and balance in hand, if any.

That is internal work. If I did so choose to look this up, I'm pretty darn sure they aren't going to start talking about a statement called an Account Sale because the rules don't care about little internal pieces of paper like that. While it is good form for the company to keep track of it and send some type of statement about the sale, don't "correct me" because I didn't call it by some particular name, or even that I didn't mention it. When books teach accounts payable, they don't necessarily go around teaching what an invoice looks like, so why do I need to make sure I mention this internal piece of paper in order for you not to endorse what I say? That's extra stuff you may mention if you like, but it's not a "disagreement" with what I said.
And apparently you do consider it a disagreement since this is part 2 of why you cannot "endorse" my response.



It will also show the expenses incurred by the consignee as well as his commission to acts as a consignee and remit the balance to the consignor. At this stage entries will be made by the consignor to record sales, expenses, commission and eliminate the stock out on consignment.

And again, if this is a basic principals class, it's not likely teaching this much detail about it. Yes, I thought about mentioning the commission, and then chose not to cause if it's a basic principals class, they very likely may not even be doing things like that, and therefore it would just confuse the issue. Again, it's not so much in opposition to anything I said, but rather that you choose to add more detail to it. Add more detail if you like, but that isn't the same as not "endorsing my view" when my view just didn't include some details.


I would like you to please refer authentic text books and the International Accounting Standards. In this case, the applicable Standards are IAS 2 Inventories and IAS 18 Revenue

I already referred to an "authentic text book" and I already quoted what it said. You want to argue about it, go argue with your precious Kieso. Furthermore, the last I looked, everyone here was volunteers, I have a life, and don't have time to go off reading all that carp every time you disagree about something, especially since a good deal of the time you're wrong anyway.

And... if the international standards in this regard are different, you might want to prove first where exactly the OP is from to even know that's the standards we need to be following.

It is my strong opinion that your goal on this board has now become finding any little thing you can manage to disagree with me about. You've got your nose stuck in a textbook, can't see real life, and can't see anything outside of the most precise, technical, complicated way of doing it, even if the textbooks are simplifying it, much to your chagrin I imagine.

I do not know why you are so arrogant? You perhaps do not wish to see beyond.

First of all correct your English. It is principles and not principals

Your reference to Kieso is incomplete amd you have quoted only that benefits you. I would suggest you refer to books of Advanced Accounting by any author which deals with consignment accounting.

Even if what you stated might be taken at face value , Kieso states occasionally and for a significant amount. He accepts that where the amounts are significant and the consignments are a regular feature, accounting must be done. I hope you will agree to that reasoning.

I am quoting an example for you to give your expert advise applying all your teaching experience as to how would you deal with such a situation. I do not need an answer from you just your expert guidance.

On 1st January 1988 Red of New York consigned to Blue of New Jersey goods for sale. Blue is entitled to commission of 6% on invoice price and 20% of any surplus price realized. Goods costing $18000 were consigned to blue of New Jersey at invoice price of $22500. The expenses of consignment amounted to $1,800 were incurred by Red. On 1st March and Account sale was received from blue showing that he had affected sales of $18,500 in respect of 75% of the quantity of goods consigned to him. His actual out of pocket expenses were freight in $180, fire insurance $90 and other expenses $230, Blue accepted a bill drawn by Red for $10,000 and remitted the balance in cash

Required: Prepare the consignment account in the books of consignor.

This question has been taken from an American text book.

I do not know why you are so arrogant? You perhaps do not wish to see beyond.

It's not about arrogance. If I am incorrect in an answer and I realize it, I will be the first to say so and correct myself, and apologize. I can even recall that you once posted a correct answer when I had mis-read a question, and I corrected myself and apologized as soon as I realized it cause I don't care to screw anyone up. It's not the first time I've screwed up and won't be the last. Same goes for you.

What I am tired of is the number of times you have stated (directly or indirectly) that I am incorrect when I am not. Or when you have been incorrect and want to continue arguing about it. (Say, preferred stock dividends, where you simply refused to accept what the problem itself blantantly came out and said.) In addition to that, the fact you seem incapable of accepting that many beginning accounting books either outright don't follow the rules, or simplify things, and you want to put everything on some advanced level when that isn't the way the books do them.

It's not about arrogance. I'm just fed up with it all. If I know I'm not wrong, I'm going to defend myself. Partly for the sake of myself and reputation, but also partly cause the OP needs to know which answer is correct. Sometimes more than one thing can be correct, and it's OK to throw in a different opinion or additional information or an alternative, which is not the same as essentially stating someone else is incorrect.


First of all correct your English. It is principles and not principals

I always find that when someone resorts to correcting spelling errors, it's because they have no real argument. I just type and sometimes I screw up, or maybe I don't even care occasionally. I will try to pay attention to all of my spellings and typing from here on out just so as not to offend you.

This isn't the least bit important or relevant, as my ability to do accounting, or teach it, is not determined by my misspelling of one lousy word. It is, quite frankly, just a stupid thing to be pointing out.


Your reference to Kieso is incomplete amd you have quoted only that benefits you. I would suggest you refer to books of Advanced Accounting by any author which deals with consignment accounting.

First, I was not attempting to get into an "advanced" discussion of the issue. When OP asks a very open-ended, incomplete sort of question without much information or details, I am going to answer in the same sort of fashion. There wasn't much info to go on, and therefore there isn't much info to get in return.

Second, that is all the info I found in the text. I was not being "selective." You asked for a reference. I gave you one. Do you not like Kieso anymore? You've certainly mention him a lot and want people to refer to him. But now that you do not like my answer, he's not good enough anymore. Hmm.. maybe it's you who only refers to him when it benefits you.

I have a life and do not have time to go off hunting down 300 advanced books until I find this topic. I have one advanced book, the one I used in college. It does not contain this topic. The topics it does contain are far more advanced than this, and ones that I wouldn't touch with a 10-foot pole, and things I rarely ever see on here anyway. (Perhaps my advanced book is not what you expect it to be.) I don't consider this an advanced topic. And I am not in school and don't have the time to got off digging up books every time I turn around. If I am going to spend any time in looking things up, it will be for the sake of my work, and not to make you happy.

Third, coincidentally I happened to catch one of the professors at the school where I work in her office today as I was passing by and went into to have a chat. Not coincidentally, this topic came up. I decided to get her opinion. She agrees with me. This particular professor teaches an advanced accounting course. Which I don't think is relevant since I don't think this is an advanced topic, but since you insist that it is, I thought I'd point that out. She still agrees with me anyway. (She also agreed with the idea of perhaps only disclosing it in the notes, or perhaps keeping it in a subsidiary, neither of which would involve a journal entry.)


Even if what you stated might be taken at face value , Kieso states occasionally and for a significant amount. He accepts that where the amounts are significant and the consignments are a regular feature, accounting must be done. I hope you will agree to that reasoning.

Yes. However, I will repeat that OP didn't exactly give any info about the situation, so I didn't give much info back. Are you quite certain that this is the situation that exists and what OP was referring to? I think not. You could have simply chosen to add more info to my post. We do that a lot around here. Instead you chose to simply say I was wrong when you don't know any more about the situation than I do. Furthermore, your second paragraph was not really in opposition to anything I said, and yet you presented it as reason #2 why you couldn't endorse my answer. But I'm the arrogant one?

I think it is you who are the arrogant one, with your nose stuck in your textbooks and having no clue about anything in the real world, or so it appears. So even when it's a principles class, or a small business where many of the nick-picky rules don't really matter, you still insist someone else is wrong or it can't be done that way. You're so into your rules and being able to drop quotes and statement numbers all over the place, that you just don't even have a concept of anything outside of that. I'm not the first one to say you appear to know nothing about the real world.

As for your example, I didn't even read it. Cause I don't care. If you wanted to have a nice, little, respectable chat about the different ways in which we handle things, I could manage that. But I'm not going to do it just to prove something to you.

IAs for your example, I didn't even read it. Cause I don't care. If you wanted to have a nice, little, respectable chat about the different ways in which we handle things, I could manage that. But I'm not going to do it just to prove something to you.

I did not ask you to prove your expertise. I take it that you are a good teacher with 20 years experience.

The example was given for your valued opinion as to how to handle such a situation.

Please believe me I am not trying to degrade you in any way. I am also like you in some matters. If there can be added for the knowledge of the readers I am all for it.

I request you to please find some time and let us have a respectable chat

What of hell fighting here? At end of day, no clear cut of the correct treatment!

whenever the consignor despached the goods to consignee(agent) on consignment basis,so at that time he pass a entry for this transaction by debiting the consignment account(nominal account) and crediting the good sent on consignment account,actually the reason behind to debit the consignment account is that first it's a nominal account so we report all expenses and losses on debit side,now the goods which is delivered to consignee comes on that side because its shows the cost of stock that is used in consignment business,then he credited good sent on consignment account to reflect the value of goods which are utilized in this business,because when the consignor purchased the goods so first he records to it in purchases account,now the point which we need to emphasize is that at a time consignor doing trading business and consignment business as well,now to determine the profitability of each one he creat an account with a name good sent on consignment which then closed to purchases accoutn at the end accounting year.

Huh?

A simple accounting treatement is in the consignors books until the stock being sold it should be treated as stock with 3rd party viz its part of his stock in the balance sheet, only when ths sales occurred it will moved from balacesheet (stock) to P&L(Cost of sales).
In the books of Consignee the stock should not be part of his stock however he can disclose in his notes to the balance sheet as contingent liability.

Rehman,

On financial statement classification, were are you going to classified goods on consigment?
You recommended entry is correct but is not really different from what Morgaine is saying... But you are simply more accurate by reflecting what has happens to the inventory.