The etymology of consignment refers us to the Latin word consignatio . It is about the act and consequence of recording . This verb, for its part, can refer to establishing an item or an economic disbursement to cover certain expenses; to determine a place to do something in it; to allocate certain funds to pay rents or debts; to deposit or assign something; or to state an opinion, data or vote in a formal or reliable manner.
A commissioner, for example, may decide to assign two officers to a park since several crimes have occurred in that public space in recent weeks. This means that the commissioner assigns two of his troops to guard the place in question.
In the field of law , a form of payment that consists of depositing the required amount or the thing itself at the disposal of a judge or the creditor himself is called consignment. This process is carried out when the creditor refuses to receive the corresponding payment or cannot do so for some reason.
The purpose of the consignment payment is to interrupt the interest and transfer the conservation costs and risk of the asset to the creditor. The consignment requires that the debtor has previously attempted to make the payment to the creditor on different occasions. These attempts must also be corroborated by a notary.
A consignment contract , on the other hand, consists of an agreement where the consignee assumes the obligation to market the consignor's merchandise, previously agreeing on a price that must be paid to the consignor. The consignee, in this framework, owns the value of the sales and pays the consignor the agreed price. The merchandise that you could not sell must be returned within the corresponding period.
Precisely, we speak of consignment merchandise to refer to those that a person called consignor , sender or principal sends to another, known as consignee , consignee or commission agent , to sell them in his name or representation, following a series of well-defined conditions . in advance.
To record the operations that are in this area, it is necessary to carry out certain procedures, many of which are also used within a company, such as the following: inventories (these can be continuous or perpetual); detailed or analytical of the goods; general merchandise or global.
It is known as the accounting record of perpetual inventories , which is carried out taking into account the operations that involve merchandise on consignment in order to know the amount of the final inventory that is in the hands of the commission agent at all times, as well as the amount of the sales that it has made and the cost of sale of the merchandise. Thanks to this method it is possible to determine profit or loss reliably and accurately.
From the total sales made by the commission agent, it is mandatory to deduct certain expenses necessary for the operation, such as the amount of transportation, freight , insurance, commissions and storage, among others that have been caused by administration, shipping and the sale itself. of the goods on consignment, whether made by the principal or the commission agent. The balance of this amount is debit and is the cost of sale of the goods; When the fiscal year closes, a payment against profits and losses is made for its balance.
The amount of net sales of consignment merchandise is deducted from the sales price of those units that are returned to the commission agent, sales discounts and rebates. Its balance is credit and is credited against profits and losses when the year ends.