This document discusses consignment, which is an arrangement where a consignor physically transfers goods to a consignee to act as a sales agent, with the consignor retaining legal title until sale. Key points covered include the legal perspective of consignment as a bailment, reasons why consignment may be preferable for consignors and consignees, responsibilities and obligations of each party, and requirements for consignees to report regularly to consignors through account sales reports detailing sales amounts.
This document discusses consignment, which is an arrangement where a consignor physically transfers goods to a consignee to act as a sales agent, with the consignor retaining legal title until sale. Key points covered include the legal perspective of consignment as a bailment, reasons why consignment may be preferable for consignors and consignees, responsibilities and obligations of each party, and requirements for consignees to report regularly to consignors through account sales reports detailing sales amounts.
This document discusses consignment, which is an arrangement where a consignor physically transfers goods to a consignee to act as a sales agent, with the consignor retaining legal title until sale. Key points covered include the legal perspective of consignment as a bailment, reasons why consignment may be preferable for consignors and consignees, responsibilities and obligations of each party, and requirements for consignees to report regularly to consignors through account sales reports detailing sales amounts.
(consignor) to another party who is to act as sales agent (consignee, factor, or commission merchant), legal title being retained by the owner until their sale.
From the legal point of view the transfer of goods
represents a bailment, the consignee having the possession of the goods for the purpose of sale as specified in the agreement between the consignor and the consignee. 1. The consignment sales may be the only way to which a wider marketing area can be secured by a producer, manufacturer, or distributor, particularly when a. the goods are just being introduced and the demand for the product is unknown or uncertain; b. sales in the past have proven unprofitable to the dealer; c. the goods are costly requiring large investment on the part of the dealer if purchased; and d. price fluctuation or product perishability is such that the dealer will agree to sell goods only if the risk of loss is borne by another. 2. Certain risks are avoided by the consignor 3. Selling specialists may be obtained by the consignor 4. The retail selling price of consigned goods can be controlled by the consignor who still owns the goods. The consignee may favor the acquisition of goods by consignment instead of by purchase for the following reasons:
1. The consignee is protected from the risk of
failure to move the product or its sales at a loss. 2. The risks of physical deterioration as well as of price fluctuation are avoided. 3. Working capital requirements are reduced, the cost of consignment inventory being carried by the consignor. 1. The consignee is entitled to reimbursement for necessary expenditures on consigned goods and also to compensation for sales. 2. The consignee has the right to offer the customary warranties on goods that are sold, the consignor being bound by the terms of such warranties. 1. The consignee must protect the goods of his principal in a reasonable and prudent manner consistent with the nature of goods and the circumstances of the consignment. 2. The consignee must sell the consigned goods at the price that is authorized or; in the absence of a set price, at a price that will best satisfy the interests of his principal. 3. The consignee must keep the goods of the consignor apart from other merchandise. 4. The consignee must report regularly on the progress of consignment sales.
◦ Account sales – the report that is rendered by the
consignee ACCOUNT SALES Sales for the account of __________________________________________ Address: ______________________________________________________ Below please find account sales of _____________ _____________________
Sold by
Date Explanation Amount
Presentation prepared by: Jennifer M. Perez Reference: Advanced Accounting Vol.1 2005 edition by Ma. Violeta V. Vicente