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Question

Difficulty: MediumNature, Features, and Terminology of Consignment Transactions

Match each consignment term or document in Column A with its correct accounting description in Column B.

  • Proforma InvoiceA document sent by the principal detailing the description, quantity, and estimated value of goods dispatched.
  • Account SalesA periodic statement rendered by the agent showing sales proceeds, expenses incurred, commission deducted, and net amount due.
  • Del Credere CommissionAn additional remuneration paid to the agent to assume the risk of bad debts arising from credit sales.
  • ConsigneeThe agent who receives goods on bailment to sell on behalf and at the risk of the sender.

Answer

Proforma Invoice matches the document sent by the principal detailing goods dispatched; Account Sales matches the periodic statement rendered by the agent showing sales, expenses, and net balance; Del Credere Commission matches the extra remuneration for bearing bad debt risk; Consignee matches the agent receiving goods on bailment.
Each consignment term correctly pairs with its unique operational role: Proforma Invoice serves as an informational document sent by the principal; Account Sales summarizes transactions rendered by the agent; Del Credere Commission provides indemnity against bad debts; and the Consignee acts as the selling agent under bailment.

Step-by-Step Solution

1
Identify the document issued at the dispatch of goods by the principal.
Proforma Invoice accompanies the consignment to provide details of goods sent without acting as a sales invoice.
Ownership does not transfer upon dispatch, so a regular invoice is not issued.
2
Identify the financial summary document prepared by the agent.
Account Sales records total sales, expenses paid by consignee, commission earned, and net balance remitted.
It acts as the primary reporting document between consignee and consignor.
3
Identify the specific commission type related to credit sales risk.
Del Credere Commission shifts the burden of bad debts from the consignor to the consignee.
In exchange for higher commission, the agent guarantees collection of debts from buyers.
4
Define the role of the receiving party in a consignment transaction.
Consignee is the agent operating on behalf of the consignor.
The legal relationship established is that of principal and agent.

Key Concept

Nature and Terminology of Consignment Transactions
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Topics

Nature, Features, and Terminology of Consignment Transactions

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