The consignor will open the following account for the transaction.
Goods out on consignment Account;
This account is credited with the cost of goods that are sent on consignment account. Here, at the end of the period, this account is closed and’ the balance is transferred to the general trading account of the consignor as a reduction from the total purchase of the period.
Consignment Account:
This one is identical to the profit and loss account. In addition, it is debited with the cost of goods sent on consignment. It is also debited with all the expenses incurred with regards to the transaction including the agents commission. The consignment account is credited with the proceeds from sales. The balance of this account shows either a profit or a loss and it is transferred to the general profit and loss account the consignors where there is closing stock, the value of such closing stock is credited to this account.
Agent’s Account:
This account is debited with the value of sales. It is on the other side of it credited with all the expenses incurred in the transaction as well as the agent’s commission. Then the balance will show the amount of money remitted by or being expected from the agent to the dealer.