Differentiate between consignor and consignee? - Find 14 Answers & Solutions | LearnPick Resources
Hi,What it means by Consignee and posavski-obzor.infossankar. The difference between consignor and consignee. The consignment process involves sending goods from a consignor to a consignee. The consignee is tasked. Question3: What is the difference between Consignment and Sales? Question4: When is Stock Consignment Account opened? Question5: Give the journal entry .
If you own or operate a small business, you might be familiar with these two words. They often deal with the transfer of merchandise from one business to another, or from an individual to a business. What makes them confusing is that they both deal with the same event, but from different sides.
Answers and Solutions
In this post, I want to outline the differences between these two words. I will discuss their definitions and their functions within a sentence. Then, at the end, I will give you an easy trick to remember the difference between them. Before we talk about consignor vs.
Consignment is the act of consigning, which is to send something to a person or a place to be sold. Here is a typical example of something that is consigned.
What’s the Difference Between a Consignor and a Consignee?
Imagine an art collector has a painting. He gives this painting on consignment to a gallery, i. He still maintains legal ownership of the painting, but he gives custody to the gallery until they sell it. Once the painting is sold, the art collector and the gallery split the revenue from the sale.
This process is called consignment. Now, who is the consignor and who is the consignee in this transaction?
What's the Difference Between Consignor and Consignee?
When to Use Consignor A consignor sometimes spelled consigner is the person who is giving over the merchandise. A del credere commission is paid by the consignor to his agent for taking additional risk of recovery of debts from the consignee on an account of credit sales made by him agent on consignor's behalf. Direct Expenses Expenses, which increases the cost of the goods and are of non-recurring nature and incurred till the goods reach the warehouse of consignee may called direct expenses.
Indirect Expenses Warehouse rent, storage charges, advertisement expenses, salaries, etc. The distinctions between direct and indirect expenses are important especially at the time of valuation of the unsold closing stock.
Advance Amount paid in advance by a consignee to consigner as security called as advance. Valuation of unsold Consignment Valuation of unsold stock will be done like a closing stock of a Trading concern and should be valued at the cost or the market price whichever is low. Here, proportionate direct expenses mean — all expenses incurred by the consignor and the expenses of consignee, which are incurred by him till the goods reach the warehouse.
To know the actual profit, at the end of an accounting period, consignment account will be credited with excess price so charged. Value of the stock will also be adjusted to the extent of profit element. In this case, consignor usually directs consignee to sale goods on invoice price only. It prevents different sale price to different customers.
It is not separately shown in the consignment account, but included in the cost of goods sold and the closing stock by inflating the rate per unit. To calculate the value of unsold stock, following formula is used. It is credited to the consignment account to calculate actual profitability.
Valuation of closing stock is done on the same basis as explained earlier i.