Concept And Meaning Of Consignment Of Goods

Maximization of profit is the main objective of each and every business. For the fulfillment of this objective, the firm has to increase the sale of goods. For this purpose, the firm has to push its sales by all possible means. The sales can be increased by opening different branches within the territory or abroad. Opening a branch is a costlier affair. Instead of it, the business house may appoint some agents in various areas. The agent sells the goods on behalf of the sender of goods against commission.

The person or firm who sends the goods is known as consignor and who receives and sells the goods on behalf and risk of the consignor is known as consignee. The goods so sent is known as consignment. Thus, consignment is the dispatch of goods by consignor to the consignee. The relationship created between the consignor and consignee is that of a principal and agent. This relationship is governed by the law of agency. The agent acts on behalf of the principal. All the expenses for goods sending and selling are borne by the consignor. The consignor is entitled to profits and bears the losses on consignment.

Thus, consignment is neither a sale by the consignor nor purchase by consignee. In other words, consignment of goods is not sale. It is mere transfer of goods from the principal to the agent.

Related Topics
Difference Between Consignment And Sales
Terms Used In Accounting For Consignment Of Goods
Types Of Consignment Expenses
Concept And Types Of Commission In Consignment

No comments:

Post a Comment