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Difficulty: MediumNature, Features, and Terminology of Consignment Transactions

Match each consignment accounting document, commission, or account term on the left with its correct definition or description on the right.

  • Pro Forma InvoiceAn informational document dispatched by the principal detailing the description, quantity, and estimated value of goods shipped.
  • Account SalesA periodic statement rendered by the agent detailing gross proceeds, expenses incurred, commission earned, and net balance due.
  • Del Credere CommissionAn additional remuneration granted to the agent in exchange for assuming the risk of bad debts on credit sales.
  • Consignment OutwardThe ledger account maintained by the consignor to record the dispatch of merchandise to an agent for sale.

Answer

Pro Forma Invoice pairs with the informational document sent by the principal; Account Sales pairs with the statement rendered by the agent; Del Credere Commission pairs with the additional remuneration for assuming bad debt risk; Consignment Outward pairs with the ledger account tracking dispatched goods.
In consignment transactions, ownership stays with the consignor, who sends a Pro Forma Invoice detailing the goods sent. The consignee acts as an agent, providing an Account Sales to report completed transactions, expenses, and commissions. When the consignee guarantees credit sales recovery, they earn a Del Credere Commission. The consignor tracks sent goods using the Consignment Outward account.

Step-by-Step Solution

1
Identify the primary document issued by the principal (consignor) at the time goods are dispatched.
The Pro Forma Invoice serves as an informational advice note detailing the items and estimated price sent to the agent.
Ownership remains with the principal, so a normal sales invoice is not issued.
2
Identify the accounting summary prepared by the agent (consignee) after selling the goods.
The Account Sales summarizes total receipts, allowable expenses, commission, and net remittance due to the principal.
This provides full accountability of the agency sales process.
3
Distinguish special commission types and relevant ledger account names.
Del Credere Commission shifts credit risk to the agent, while Consignment Outward records goods dispatched in the consignor's accounting system.
Del credere protects the principal against default, and Consignment Outward reflects the transfer of inventory for sale.

Key Concept

Nature and Terminology of Consignment Transactions
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Topics

Nature, Features, and Terminology of Consignment Transactions

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