Accounting Entries in the Books of the Consignee

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Who is a Consignee?

The consignee is the entity who is financially responsible (the buyer) for the receipt of a shipment in the contract of carriage. Generally, the consignee is the same as what a receiver is.

  • If a sender who dispatches an item to a receiver via the delivery service, then the sender is the consignor, and the recipient is the consignee, and the deliverer is the carrier of the good.

  • The consignee is the recipient of the goods which is being shipped.  The consignee is a customer or a client.  

  • The main owner of the product is the consignee, and hence it is important to keep in mind that the shipments are destined for a 3rd party logistics company which will not be listed as the 3PL as the consignee. 

  • The consignee is the importer of the record in the international shipments.

The terms consignee and consignor are used by a company which ships its products on a consignment basis.  The owner of the cargo consigns the product to a freight carrier for transporting the same to the consignee. The ownership of the freight does not change legally until the recipient of the goods signs the BOL. 

Journal Entries in the Books of Consignee

The set of journal entries which are recorded in the books of the Consignee are as follows:

1. When the Goods is Received:

  • No entry required

2. When the Carriage Expenses are Incurred by the Consignee:

  • Consignor Account Dr

  • To Bank Account

(Expenses being paid on consignment)

3. Advance that is Remitted to Consignor by way of   Cash/Cheque or Bills Payable:

  • Consignor Account Dr

  • To Cash/Bank/Bills Payable A/c

(Advance paid to Consignor for the goods)

4. When Consignee Sold the Goods:

  • For cash sales:

  • Bank Account Dr

  • To Consignor Account

(cash sales of consignment occurred)

5. For Credit Sale:

  • Consignment Debtors Account Dr

  • To Consignor Account

(Occurrence of credit sales of consignment)

6. When the Commission Becomes Due:

  • Consignor Accounts Dr

  • To Commission Account

(Being commission earned at the time of sale of consignment)

7. When the Consignee Collected the Debt from Consignment Debtors:

  • Bank Account Dr 

  • To Consignment Debtors A/c

(Being the Collection of consignment debts happen)

8. For Bad Debts, If Any:

  • If Del Credere Commission is not paid:

  • Consignor Account Dr

  • To Consignment Debtors A/c

(bad debt that is incurred on sales)

9. If Del Credere Commission is Paid:

  • Bad Debts Account Dr

  • To Consignment Debtors A/c

(Being bad debts incurred on the consignment sales)

10. Bad Debts are Transferred to his Profit & Loss Account:

  • Del Credere Commission Account Dr

  • To Bad Debts Account

(Being the bad debts transferred to Del Credere Commission Account)

11. Closing of the Del Credere Commission and Commission Account:

  • Commission Account Dr

  • Del Credere Commission Account Dr

  • To Profit and Loss Account

(Being Commission account and balance of Del Credere account is closed by transferring the Profit and Loss Account)

12. Settlement of the Account with Consignor:

  • Consignor Account Dr

  • To Cash/Bank/Bill Payable A/c

(Being the amount, which is due to Consignor is settled)

Consignee rights

The rights of the consignee under an air waybill are regulated by the Convention of Warsaw. With the unification of Certain Rules for the International Carriage by Air, 1929 and the Montreal Convention for the alignment of certain rules for the International Carriage by Air 1999 and other the relevant state laws (which may be the one law which has been chosen as the proper law by the parties, or for any combination of laws represented by the seller, buyer, consignor, and even the carrier.) This is very important as according to the export documents.

FAQ (Frequently Asked Questions)

1.What is the Contract of Carriage?

Ans. A contract of carriage means the legal responsibilities of the carrier and the user of the good. The carrier which may be a freight trucking carrier, or the air cargo, or the ocean carrier while the user is either the consignor or the consignee.

The carriage of the goods in an international freight shipment has been standardized by international convention in this matter. The requirements are to ensure the uniformity in the applicability of the rules and laws.

In particular, the standard contract of the carriage includes all carrier contract’s terms and conditions, and as referenced in the freight forward terms and conditions, which set minimum standards for the carrier liability and responsibility, for instance in the case of loss or damage.

The convention here also standardizes the rights and responsibilities of all the shippers and their freight forwarders.

2. Who is a Consignor?

Ans. The consignor may be referred to as the shipper, or the one who obtain the shipping or transfer documents for the goods that they are selling to the consignee. The consignor keeps the title or the ownership of the property until it is transferred to or sold to the final or end party.

“Shipper” and “Consignor” are considered to be equal and the same person or entity, in terms of law and general usage. 

3. What is BOL?

Ans. The bill of lading is a necessary document to move a freight shipment. The bill of lading abbreviated as BOL works as a receipt of the freight services, or in a contract between a freight carrier and the shipper and with a document of the title.