Commission

A remuneration paid by consignor to consignee or to seller by producer of goods for sale of goods or for provide services is called commission.

The payment of commission as remuneration for services rendered or merchandise sold is a common way to reward sales individuals. Payments typically will be calculated on the basis of a share of the goods sold. this can be some way for companies to resolve the principal–agent problem, by attempting to realign employees' interests with those of the firm.

One of the most common means of trying to align principal and agent interests is to design a contract with incentives that track agent performance. The principal–agent theory provides an explanation for the dissimilarities across the marketing companies in the varieties of compensation plans employed by them, like mounted salary, straight commission or a combination of each fixed salary and straight commissions.

Account Sales

A periodical statement sent by consignee to consigner that show the detail of goods sold, price realized, commission and expenses incurred by consignee on consignment is called account sales.

A statement showing the net results of a procurement or sale transaction created by one person on another's account or behalf with commission other alternative charges included.

Difference between Sale and Consignment

Difference Between Consignment And Sales
Consignment can't be treated as sales of goods. it's totally different from sales. The distinction between consignment and sales are as follows:

1. Ownership
Consignment: The possession of the products remains with the consigner till sales is effected by the consignee.
Sales: The possession of the products right away transferred to the buyer once sale is effected.

2. Relationship
Consignment: the relationship between the consigner and recipient are of principal and agent. Their relation ship area unit continuing until terminated.
Sales: the connection between the 2 parties are that of seller and emptor and that they terminated as before long as payment is made and merchandise are delivered.

3. Expenses
Consignment: The expenses incurred by the recipient to execute sale and therefore the expenses incurred by consigner to send the products to the recipient, each are borne by the consigner.
Sales: Any expenses incurred once the sale isn't borne by the vendor.

4. Risk
Consignment: the danger of products under consignment is usually with the consigner.
Sales: once the sale is created the risk is transferred to the customer.

5. return of products
Consignment: recipient will come merchandise to the consignor since those are properties of consigner.
Sales: A emptor can't come merchandise unless the products are found defective or broken or the vendor agrees to.

6. Statement
Consignment: For giving details regarding the products sold and expenses incurred by him, recipient sends the account sales to consigner.
Sales: the customer needn't submit any account sales to the vendor.

7. Stock
Consignment: The unsold stock with the recipient will be treated as a stock of the consigner.
Sales: just in case of sale, the buyer's unsold stock don't attract the vendor.

8. Commission
Consignment: Commission is that the main thought of consignment. The consignee performs the marketing activity just for commission.
Sales: Profit is that the main thought of sales.

Consignment

Consignment is a process in which goods are sent to consignee by consignor for sale purpose.

An account which is prepared to record consignment transaction is called consignment account.

Consignment is that the act of consigning, which is placing any material within the hand of another, but retentive ownership till the goods area unit sold or person is transferred. this may be done for shipping, transfer of goods to auction, or for sale in a very store (i.e., a consignment shop). To consign means to send and therefore consignment means sending product to another person. in case of consignment goods area unit sent to the agent for the aim of sale. The possession of these product remains with the sender. The agent sells the goods on behalf of the sender, in step with his instructions. The sender of products is thought as consignor and the agent is thought as the receiver.

Inward Consignment

A consignment from consignee’s point of view is called inward consignment.

It is referred to as inward once the receipt of the number of goods is created for the purpose of sale.Goods sent on consignment don't become the property of the receiver. He has not bought them. The ownership remains with the sender o the consignor. If the products ar destroyed, the receiver (consignee) is nor the least bit responsible. The loss can fall on the shipper. The consignee tries to sell the products per the directions of the shipper. once the products are sold , he can deduct his expenses, commission etc., from the sale return and also the balance is remitted to the consignor. the link between the consignor and also the consignee is that of principal and agent.The receiver is that the agent. The receiver acts entirely on behalf of the shipper.The consignee is entitled to his remuneration that is mostly fastened on the premise of a commission on sales. The expenses incurred by the consignee should even be reimbursed by the principal. the coed should remember that the consignee doesn't get the goods; he simply receives the possession of products. Therefore, such merchandise need special treatment in accounts.

Outward Consignment

A consignment from consignor’s point of view is called outward consignment.

 OR

Dispatch of goods for consignor to consignee is called consignment outward

Parties in Consignment Account

Two parties are involved in Consignment Account

Consignor 

Consignee