Account sales

Definitions and explanation

Account sales is a frequently used document in consignment business. This document is very important for consignor because it provides him all the information about consignment related activities and transactions occurred at consignee’s end. Account sales is periodically prepared by consignee and forwarded to the consignor so that he can update his business and accounting records related to that particular consignment.

Typically, an account sales includes information regarding type and quantity of goods sold by consignee, per unit sales price, total sales proceeds realized upto current date, commission charged by consignee, expenses incurred by consignee on behalf of the consignor and the balance amount payable to the consignor.

The consignee may have to pay some expenses in respect of the goods consigned to him. Examples of such expenses include, insurance expenses, unloading wages, marketing expenses and godown rent etc. As the consignee acts as an agent and pays all these expenses on behalf of the consignor, he is entitled for a reimbursement of such expenses. Therefore, before remitting sales proceeds to the consignor, the consignee deducts not only his commission but also the expenses paid by him in the course of performing his function. The details regarding all these deductions is brought to the knowledge of consignor through account sales so that he can update his accounting record and find the net profit or loss generated by his consignment business.

Format of account sales

Account sales is a simple statement which consignees prepare to communicate to the consignors their consignment related financial transactions and activities. It is not a part of the formal accounting record of either party. Also, there is no specific or standard format available for the preparation of account sales. However, the consignor may guide consignee regarding the order in which the information may be arranged in the account sales. The best format is one which fully satisfy the information needs of the consignor.

We can divided an account sales into three sections on the basis of information it provides to the consignor.

• The header section comprises of the business name of consignee, the business name of consignor, the date at which the account sales is prepared and some particulars that can be helpful to recognize the consignment for which the account sales is prepared.
• The middle section shows the actual transactions i.e., the details of the gross sales proceeds realized, consignee’s regular and del credere commission, expenses paid on consignee, any advance sent by consignee to consignor and the net balance for which the consignee is liable to pay.
• The bottom section talks about the mode of payment being used by the consignee to clear the balance and also contains the signatures of the consignee.

An easy to follow format of account sales has been used in the example given below:

Examples

Example 1

On October 1, 2020, John & Co of Michigan consigned 500 lawn mowers to Roberts & Co in New York. On October 31, 2020, Roberts sent an account sales with a cross-check for the balance.

The John found the following transactions on the account sales sent:

• 400 lawn mowers sold @ $300 each and 100 @ $280.
• Unloading charges $50
• Storage and insurance expenses $250
• Commission on sales @ 15%

Required: Prepare an account sales using above information

Solution:

The format of account sales shown in the above example is pretty much simple. The additional details that an account sales may contain includes credit sales, other receipts like recovery of bad debts and insurance claims received, bad debts, del credere commission, advances and remittances already sent by consignee, and the amount due, if any.

Some more formats with additional details are given below:

Example 2

An account sales showing the sale of 100 cases of radios by Amitabh Traders (consignee) on behalf of Rahul & Co. (consignor)

Example 3

An account sales showing the sale of 1,450 agricultural sprayers by Agri Traders & Distributors (consignee) on behalf of David Tech Co. (consignor)