FINANCIAL ACCOUNTING
 CHAPTER 1
 CONSIGNMENT ACCOUNTS
• Consignment means sending of goods by one
merchant to the agent for sale in which the sole risk
remains with the sender.
• Sender is the consignor & receiver is the consignee &
the relationship is of the principle & agent. Sending of
goods is outward consignment & receiving of goods is
inward consignment.
Difference between consignment &
sale
Basis
consignment
sale
1)ownership- remains
transferred
2)payment- consignee not
purchaser is
liable till the sales
liable
3)relationship- principal &
buyer& a seller
agent
4)riskof the consigner of the buyer
5)expenses- borne by the
borne by the buyer
consigner
6)commission- consignor gives not given by the buyer
it
Basis
consignment
sale
7)Return of goods- unsold goods can
cannot
be returned
till any problem
8)Account sales- consignee sends
not sent
9)Right to sell
The goods consignee sells in
seller sells
the name of consignor
in own name
10)Settlement
Of disputes --Indian Contract Act, Sales of Goods
1872.
Act,
1930
some important terms
1) Proforma invoice:-
consist of information relating
to the nature, price, quantity, weight, minimum sale
price etc. of the goods sent by the consigner.
2) Expenses on consignment:a) non-recurring: incurred to bring goods to the
godown or place of agent e.g. freight, custom duty,
insurance in transit, octroi, unloading charges.
b) Recurring : incurred after the goods reached the
place of consignee e.g. godown expenses, selling
expenses, repair expenses, etc.
3)Commission:- given on amount of sales. In additiona) Del-credere- given on total sales to make the consignee
bear the loss on account of bad debts.
b) Overriding comm- given to make the consignee sell the
goods at higher prices. It is paid as per the agreement and
on the excess price.
4) Account sales:- sent by the consignee showing the quantity
sold, expenses incurred, commission, amount sent by the
consignee,& the amount payable by the consignor, etc.
5)Advance amount by consignee:- may be in the form of cash,
bank draft or B/R and is given by consignee as security for
the goods sent on consignment.
Accounting procedure
Accounts opened in the books of consignor:1)Consignment account- is a nominal a/c and prepared
like trading/p&l a/c. The profit or loss of this a/c is
transferred to general P&L a/c
2)Goods sent on consignment a/c- a real a/c. balance is
transferred to the credit side of trading a/c.
3)Consignee’s a/c- personal a/c. represents the amount
due by or due to the consignee.
4) Stock on consignment a/c- real a/c. balance is carried
forward.
Accounts to be opened in the books of Consignee:1) Consignor’s a/c- personal a/c. amount to or from the
consignor is known.
2) Commission a/c- nominal a/c. balance transferred to
the credit side of the P&L a/c.
CHAPTER 2
JOINT VENTURE ACCOUNTS
A joint venture is a temporary partnership of two or more than two persons which
has been established for doing a specific transaction and for dividing the profit
or loss thereof in the agreed ratio. This partnership comes to an end as soon as
the specific transaction is over. This is also known as joint trade or joint
adventure.
Characteristics:- 1)There should be two or more than two persons.
2)There should be an agreement between the co-ventures.
3)It comes into existence for doing a specific transaction.
4)It comes to an end as soon as the specific transaction is over.
5)The main objective is to earn profit.
6)The control and mangt. May be done by all or by any one or more co-venturers
on behalf of all the co-venturers.
Need and objectives: The main purpose is to combine the capital , skills and
specialized facilities with different persons for earning the
profits. It may consist of consignment, contract,
speculation etc.
Accounting treatment:- four methods1)Joint banking method
2) To keep record of JV by one co-venturer
3)To keep record of JV by all co-venturers separetly
4) Memorandum method