Collection of Credit Sales dues from Consignment Debtors by the Consignee

SN 11

Transaction

The Consignment debtors may payup their dues to the consignee in one or more of the following ways.

  • Paying cash to the consignee
  • Issuing a cheque to the consignee

  • Transferring an asset

    • Endorsing a Bill Receivable by them to the consignee

  • Taking up or assuming a liability

    • Accepting a bill drawn on them by the consignee
    • Taking over a bill payable by the consignee

Payments and transfers may also be made to the consignor.

Example

Received by the consignee from the consignment debtors

  1. Cash 40,000 from M/s SW Traders,
  2. Cheque 50,000 from M/s IM Brothers,
  3. Bill accepted by M/s SW Traders 12,500,
  4. Bill Endorsed by M/s IM Brothers 10,000
  5. Bill Payable taken over by M/s SW Traders 5,000

Consignor Books - No Entry

Where no distinction has been made between credit sales and cash sales at the time of recording sales, the amount due on account of credit sales are debited to the Consignee a/c itself.

Consignee a/c
To Consignment a/c
Dr
[For the sales made on credit to M/s SW Traders]

In such a case, the fact that the credit sales dues have been collected will not have an affect on the books of the consignor, as the total dues have been recorded as being dues from the Consignee himself earlier.

Consignor Books

Dr/Cr - Transaction analysis

When credit sales have been recorded as dues from consignment debtors, the Consignment Debtors a/c balance indicates the amount due from them.

Consignment Debtors a/c
To Consignment a/c
Dr
[For the sales made on credit to M/s SW Traders]

From the moment the consignee has received the payment made by consignment debtors towards their dues, it would be the consignee who would be due to the consignor to the extent of the amount collected.

To indicate this, a debit balance equal to the amount collected from consignment debtors is transferred from the consignment debtors a/c to the consignee a/c.

From To To Transfer Entry
A B Debit Balance Dr. B
Cr. A
Credit Balance Cr. B
Dr. A

The mode of payment would be irrelevant in the books of the consignor

  • Debit - Consignee a/c

    Personal
    ↓
    Debit
    {the benefit receiver}

    Consignee receives the due making him the benefit receiver.

    Debit a personal account, to create or increase a due from them.

  • Credit - Consignment Debtors a/c

    The consignment debtors having paid up the due would be the benefit givers.

    Since the consignment debtors have paid up, they are no longer due to the extent of the amount paid. Credit a personal account, to reduce the due from them.

    Note

    • Dr - Individual Consignment Debtor a/c

      To derive greater information

    • No entry

      To derive lesser information

Journal

  1. Dues collected in cash

    Consignee a/c
    To Consignment Debtors a/c
    		Dr
    		 40,000
    40,000
    [For the cash collected by the consignee from M/s SW Traders towards their dues]

    • Opting to derive greater information

      Consignee a/c
      To SW Traders a/c
      		Dr
      		 40,000
      40,000

  2. Dues collected through a cheque

    Consignee a/c
    To Consignment Debtors a/c
    		Dr
    		 50,000
    50,000
    [For the cheque issued by M/s IM Brothers to the consignee towards their dues]

    • Opting to derive greater information

      Consignee a/c
      To IM Brothers a/c
      		Dr
      		 50,000
      50,000

  3. Bill drawn by the consignee accepted by the consignment debtor

    Consignee a/c
    To Consignment Debtors a/c
    		Dr
    		 12,500
    12,500
    [For the Bill drawn on them by the consignee towards dues accepted by M/s SW Traders]

    • Opting to derive greater information

      Consignee a/c
      To SW Traders a/c
      		Dr
      		 12,500
      12,500

  4. Bill endorsed by the consignment debtor to the consignee

    Consignee a/c
    To Consignment Debtors a/c
    		Dr
    		 10,000
    10,000
    [For the Bill endorsed by M/s IM Brothers to the consignee towards dues]

    • Opting to derive greater information

      Consignee a/c
      To IM Brothers a/c
      		Dr
      		 10,000
      10,000

  5. Bill payable by the consignee taken over by the consignment debtor

    Consignee a/c
    To Consignment Debtors a/c
    		Dr
    		 5,000
    5,000
    [For the Bill Payable by the consignee taken over by M/s SW Traders in settlement of their dues]

    • Opting to derive greater information

      Consignee a/c
      To SW Traders a/c
      		Dr
      		 5,000
      5,000

Single entry for Net Effect

Where the collections are not being recorded date wise, a single entry for the total amount may be recorded.

Consignment
Debtors 		Consignee
1)
2)
3)
4)
5) 		−40,000
−50,000
−12,500
−10,000
−5,000 		+40,000
+50,000
+12,500
+10,000
+5,000
Net −1,17,500 +1,17,500
Dr(+)/Cr(−)
Consignee a/c
To Consignment Debtors a/c
Dr
 1,17,500
1,17,500

  • Opting to derive greater information

    Consignment
    Debtors     		Consignee
    1)
    3)
    5)     		−40,000
    −12,500
    −5,000     		+40,000
    +12,500
    +5,000
    Net −57,500 +57,500
    Dr(+)/Cr(−)
    Consignee a/c
    To SW Traders a/c
    		Dr
    		 57,500
    57,500
    Consignment
    Debtors     		Consignee
    2)
    4)     		−50,000
    −10,000     		+50,000
    +10,000
    Net −60,000 +60,000
    Dr(+)/Cr(−)
    Consignee a/c
    To IM Brothers a/c
    		Dr
    		 60,000
    60,000

Ledger

One of the following sets of accounts will appear in the ledger depending on the choice made relating to the quantum of information that the accounting system has to provide.

  • Normally

    Consignment Debtors a/c
    Dr Cr
    Particulars Amount Particulars Amount

    To Consignee a/c
    To Consignee a/c
    To Consignee a/c
    To Consignee a/c
    To Consignee a/c
    40,000
    50,000
    12,500
    10,000
    5,000
    Consignee a/c
    Dr Cr
    Particulars Amount Particulars Amount

    By Consignment Debtors a/c
    By Consignment Debtors a/c
    By Consignment Debtors a/c
    By Consignment Debtors a/c
    By Consignment Debtors a/c
    40,000
    50,000
    12,500
    10,000
    5,000

    Net effect

    Where one entry for all collections has been recorded.

    Consignment Debtors a/c
    Dr Cr
    Particulars Amount Particulars Amount

    To Consignee a/c
    1,65,000

    Consignee a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Consignment Debtors a/c
    1,65,000

  • Opting to derive greater information

    Consignee a/c
    Dr Cr
    Particulars Amount Particulars Amount

    To SW Traders a/c
    To IM Brothers a/c
    To SW Traders a/c
    To IM Brothers a/c
    To SW Traders a/c
    40,000
    50,000
    12,500
    10,000
    5,000

    SW Traders a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Consignee a/c
    By Consignee a/c
    By Consignee a/c
    40,000
    12,500
    5,000
    IM Brothers a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Consignee a/c
    By Consignee a/c
    50,000
    10,000

    Net effect

    Where one entry for all collections from each debtor has been recorded.

    Consignee a/c
    Dr Cr
    Particulars Amount Particulars Amount

    To SW Traders a/c
    To IM Brothers a/c
    67,500
    60,000

    SW Traders a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Consignee a/c
    62,500
    IM Brothers a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Consignee a/c
    60,000

Consignee Books

Dr/Cr - Transaction analysis

But for the fact that they are received from the consignment debtors, these transactions are like any other receipt by the consignee.

  • Credit - Individual Consignment Debtor a/c

    Personal
    ↓
    Credit
    {the benefit giver}

    The consignment debtor making the payment would be the benefit giver.

    Note

    • Dr - Combined Consignment Debtors a/c

      To derive lesser information

      Though theoretically possible, this is is impractical as the consignee is responsible for collections of dues from the consignment debtors, for which he would be requiring the information relating to the dues from individual consignment debtors.

  • Debit -

    The account to be debited is dependent on the mode of payment received.

    • Cash a/c

      Real
      ↓
      Debit
      {what comes in}

      Cash comes in, when the due is received in cash.

    • Bank a/c

      Personal
      ↓
      Debit
      {the benefit receiver}

      Due received through a cheque goes into the bank account, making Bank the benefit receiver.

    • Bills Receivable a/c (Transferring an asset)

      Real
      ↓
      Debit
      {what comes in}

      Where the receipt is in the form of an asset transferred by the consignment debtor, the asset comes in.

      This would be the case, when

      • a bill receivable by the consignment debtor is endorsed by him.

    • Bills Payable a/c (Taking over a liability)

      Personal
      ↓
      Debit
      {the benefit receiver}

      Where the liability gets cleared by being taken over by the consignment debtor, the account representing the liability would be the benefit receiver.

      This would be the case, when

      • a bill drawn on the consignment debtor is accepted by him and
      • a bill payable is taken over by the consignment debtor

Journal

  1. Due received in cash

    Cash a/c
    To SW Traders a/c
    		Dr
    		 40,000
    40,000
    [For the cash received from M/s SW Traders]

    • Opting to derive lesser information

      Cash a/c
      To Consignment Debtors a/c
      		Dr
      		 40,000
      40,000

  2. Due received by cheque

    Bank a/c
    To IM Brothers a/c
    		Dr
    		 50,000
    50,000
    [For the cheque received towards dues from M/s IM Brothers]

    • Opting to derive lesser information

      Bank a/c
      To Consignment Debtors a/c
      		Dr
      		 50,000
      50,000

  3. Bill Received towards dues

    Bills Receivable a/c
    To SW Traders a/c
    		Dr
    		 12,500
    12,500
    [For the Bill drawn on M/s SW Traders accepted by them]

    • Opting to derive lesser information

      Bills Receivable a/c
      To Consignment Debtors a/c
      		Dr
      		 12,500
      12,500

  4. Endorsed bill received towards dues

    Bills Receivable a/c
    To IM Brothers a/c
    		Dr
    		 10,000
    10,000
    [For the Bill endorsed by M/s IM Brothers towards their dues]

    • Opting to derive lesser information

      Bills Receivable a/c
      To Consignment Debtors a/c
      		Dr
      		 10,000
      10,000

  5. Bills Payable taken over

    Bills Payable a/c
    To SW Traders a/c
    		Dr
    		 5,000
    5,000
    [For the Bill Payable taken over by M/s SW Traders in settlement of their dues]

    • Opting to derive lesser information

      Bills Payable a/c
      To Consignment Debtors a/c
      		Dr
      		 5,000
      5,000

Ledger

One of the following sets of accounts will appear in the ledger depending on the choice made relating to the quantum of information that the accounting system has to provide.

  • Normally

    SW Traders a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Cash a/c
    By Bills Receivable a/c
    By Bills Payable a/c
    40,000
    12,500
    5,000
    IM Brothers a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Bank a/c
    By Bills Receivable a/c
    50,000
    10,000

  • Opting to derive lesser information

    Consignment Debtors a/c
    Dr Cr
    Particulars Amount Particulars Amount



    By Cash a/c
    By Bank a/c
    By Bills Receivable a/c
    By Bills Receivable a/c
    By Bills Payable a/c
    40,000
    50,000
    12,500
    10,000
    5,000
Author : The Edifier
SN 13