Question

Which of the following statement is correct?

• A. Consignee will pass a journal entry in his books at the time of receiving goods from consignor.
• B. Consignee will not pass any journal entry in his books at the time of receiving goods from consignor.
• C. The ownership of goods will be transferred to consignee at the time of receiving the goods.
• D. Consignee will treat consignor as creditor at the time of receiving goods.

Answer 1

Answer: (B)

Consignee will not pass any journal entry in his books at the time of receiving goods from consignor.

This is a personal account. It should be noted that the consignee is not the buyer. His personal account, therefore, is not debited when goods are sent to him. In cases where it is customary for the consignee to send some money as an advance against the consignment the payment is merely and advance (by way of security) and not a part of payment. Hence the advance received from the consignee should be posted to the credit side of the consignee's personal account. In case part of the stock is still lying unsold the proportionate amount of advance should be carried down as credit balance in consignee's personal account. In case where consignor draws a bill on consignee the bill is known as a documentary bill.