Entries in the Books of a Consignor for SS 3

Class: SS 3
Term: First Term
Week: 6
Age: 16 years
Duration: 45 minutes
Subject: Financial Accounting
Curriculum Theme: Special Transactions
Previous Lesson: Consignment Accounts, Meaning and Terminologies
Topic: CONSIGNMENT ACCOUNT;
Subject Matter: Entries in the books of consignor (preparation); Goods sent on consignment acct; Consignee’s account; Trading, profit and loss account

Specific Objectives

By the end of the lesson, pupils/students should be able to:

Cognitive Domain

• Define consignment and identify the parties involved.
• State the various entries made in the books of a consignor for consignment transactions.
• Prepare the Consignment Account to ascertain profit or loss.
• Prepare the Goods Sent on Consignment Account.
• Prepare the Consignee’s Account in the consignor’s ledger.
• Explain how consignment profit or loss is transferred to the Trading, Profit and Loss Account.

Affective Domain

• Appreciate the importance of accurate record-keeping in consignment transactions.
• Develop an interest in financial accounting principles related to special sales arrangements.

Psychomotor Domain

• Demonstrate the preparation of consignment accounts from given transactions.
• Construct T-accounts for Goods Sent on Consignment and Consignee’s Account.

Reference Materials

The following resources were used in planning this lesson:

• 2025 Revised 9 Years Basic Education Curriculum
• Relevant State Unified Scheme of Work
• A suitable Financial Accounting textbook for SS 3
• The HeadTeacher Scheme of work

Instructional Materials

The teacher will teach this lesson with the aid of:

• Charts illustrating consignment account formats
• Pictures of goods being consigned
• Sample invoice documents for consignment transactions
• Whiteboard and markers
• Textbooks

Rationale for the Lesson

This lesson is important as it provides students with practical knowledge of accounting for special business arrangements like consignment. Understanding these entries helps in accurately determining business profitability and financial position, which is essential for informed decision-making in real-world scenarios.

Prerequisite/Previous Knowledge

Students should have a basic understanding of double-entry bookkeeping, ledger accounts, and the preparation of final accounts (Trading, Profit and Loss Account).

Lesson Content/Board Summary

CONSIGNMENT ACCOUNT

Consignment Account Overview

Consignment is an arrangement where one party (the consignor) sends goods to another party (the consignee) for sale on behalf of the consignor. The consignee sells the goods and receives a commission, while the consignor retains ownership of the goods until they are sold.

The parties involved in a consignment transaction are:

1. Consignor: The person who sends the goods to be sold.
2. Consignee: The person who receives the goods for sale and earns a commission.

Entries in the Books of the Consignor

The consignor needs to record all transactions related to the consignment to determine the profit or loss made on the goods sent.

1. When goods are sent on consignment:

   Debit: Consignment Account

   Credit: Goods Sent on Consignment Account

   (Being goods sent on consignment at cost or invoice price)

2. For expenses incurred by the consignor (e.g., freight, insurance):

   Debit: Consignment Account

   Credit: Cash/Bank Account

   (Being expenses paid by the consignor)

3. For advances received from the consignee:

   Debit: Cash/Bank Account

   Credit: Consignee’s Account

   (Being advance received from the consignee)

4. For sales made by the consignee:

   Debit: Consignee’s Account

   Credit: Consignment Account

   (Being sales made by the consignee)

5. For expenses incurred by the consignee (e.g., storage, selling expenses):

   Debit: Consignment Account

   Credit: Consignee’s Account

   (Being expenses paid by the consignee)

6. For commission payable to the consignee:

   Debit: Consignment Account

   Credit: Consignee’s Account

   (Being commission due to the consignee)

7. For remittance received from the consignee (final settlement):

   Debit: Cash/Bank Account

   Credit: Consignee’s Account

   (Being balance amount received from the consignee)

8. For goods returned by the consignee (if any):

   Debit: Goods Sent on Consignment Account

   Credit: Consignment Account

   (Being goods returned by the consignee)

9. For closing stock on consignment (unsold goods):

   Debit: Consignment Stock Account

   Credit: Consignment Account

   (Being value of unsold goods at the end of the period)

10. For profit or loss on consignment:

    If Debit side of Consignment Account < Credit side: Profit

    Debit: Consignment Account

    Credit: Profit and Loss Account

    (Being profit on consignment transferred to Profit and Loss Account)

    If Debit side of Consignment Account > Credit side: Loss

    Debit: Profit and Loss Account

    Credit: Consignment Account

    (Being loss on consignment transferred to Profit and Loss Account)

Preparation of Consignment Account

The Consignment Account is a nominal account prepared by the consignor to ascertain the profit or loss on each consignment.

Example 1: Preparing a Consignment Account

Question: On 1st January 2023, Mr. A consigned goods costing ₦10,000 to Mr. B. Mr. A paid freight ₦500 and insurance ₦200. Mr. B sold goods for ₦15,000, incurred selling expenses of ₦300, and is entitled to 10% commission on sales. Prepare the Consignment Account in Mr. A’s books.

Solution:

Goods Sent on Consignment Account

This is a real account prepared by the consignor to record the value of goods sent on consignment. It is eventually transferred to the Trading Account at the end of the accounting period.

Consignee’s Account (in Consignor’s Books)

This is a personal account in the consignor’s ledger, showing the amount due from or to the consignee. It records all transactions between the consignor and consignee.

Transfer of Consignment Profit/Loss to Trading, Profit and Loss Account

The profit or loss determined from the Consignment Account is a revenue item for the business. Therefore:

1. If there is a profit on consignment, it is transferred to the credit side of the Profit and Loss Account.

   Debit: Consignment Account

   Credit: Profit and Loss Account

2. If there is a loss on consignment, it is transferred to the debit side of the Profit and Loss Account.

   Debit: Profit and Loss Account

   Credit: Consignment Account

The Goods Sent on Consignment Account is closed by transferring its balance to the credit side of the Trading Account, as it represents a reduction in the goods available for sale by the consignor.

Teaching Methods/Instructional Techniques

Discussion, Explanation, Demonstration, Guided Practice, Question and Answer, Individual Practice

Instructional Procedures

Step 1: Introduction

Time: 5 minutes

Teaching Skill: Activating prior knowledge, Questioning

Teacher’s Activity: The teacher asks students about different ways businesses sell their goods and introduces the concept of selling through agents. The teacher then defines consignment.

Pupils’ Activity: Students respond to questions and listen attentively to the introduction of consignment.

Learning Point: Consignment concept introduction

Step 2: Explanation of Consignor’s Initial Entries

Time: 8 minutes

Teaching Skill: Explanation, Demonstration

Teacher’s Activity: The teacher explains the initial entries made in the consignor’s books, covering goods sent on consignment and expenses incurred by the consignor. The teacher demonstrates with simple T-account entries.

Pupils’ Activity: Students listen, ask questions, and observe the demonstration.

Learning Point: Consignor’s initial entries

Step 3: Recording Consignee’s Transactions

Time: 8 minutes

Teaching Skill: Explanation, Guided Practice

Teacher’s Activity: The teacher explains how the consignor records sales made by the consignee, expenses incurred by the consignee, and commission payable. The teacher guides students through recording these entries.

Pupils’ Activity: Students participate in recording the entries and clarify their understanding.

Learning Point: Recording consignee’s transactions

Step 4: Preparation of Consignment Account

Time: 8 minutes

Teaching Skill: Demonstration, Guided Practice

Teacher’s Activity: The teacher demonstrates how to prepare a complete Consignment Account using a simple example, showing how to balance it to find profit or loss. The teacher refers to the chart of account format.

Pupils’ Activity: Students follow the demonstration and attempt to prepare a Consignment Account with guidance.

Learning Point: Consignment account preparation

Step 5: Goods Sent on Consignment Account

Time: 4 minutes

Teaching Skill: Explanation

Teacher’s Activity: The teacher explains the purpose and preparation of the Goods Sent on Consignment Account, showing its transfer to the Trading Account.

Pupils’ Activity: Students listen and note the key aspects of the Goods Sent on Consignment Account.

Learning Point: Goods sent account preparation

Step 6: Consignee’s Account in Consignor’s Books

Time: 3 minutes

Teaching Skill: Explanation

Teacher’s Activity: The teacher explains the purpose and preparation of the Consignee’s Account in the consignor’s ledger, highlighting how it tracks amounts due.

Pupils’ Activity: Students pay attention to the details of the Consignee’s Account.

Learning Point: Consignee account preparation

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

1. Who is a consignor?
2. State any two debit entries in the Consignment Account.
3. How is profit on consignment transferred to the final accounts?
4. If goods costing ₦5,000 were sent on consignment and sold for ₦7,000, with expenses of ₦500 and commission of ₦700, what is the profit or loss?

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Consignment accounting understanding

Step 8: Note-Taking

Time: 4 minutes

Teaching Skill: Guided Writing

Teacher’s Activity: The teacher guides pupils/students to copy the essential Board Summary notes into their notebooks, ensuring clarity on the entries and account formats.

Pupils’ Activity: Pupils/students copy the notes carefully into their notebooks.

Learning Point: Consignment entries recording

Step 9: Conclusion

Time: 2 minutes

Teaching Skill: Summarisation

Teacher’s Activity: The teacher briefly summarises the key accounts prepared by the consignor and reiterates the importance of accurate record-keeping in consignment transactions.

Pupils’ Activity: Students listen and ask any final questions.

Learning Point: Consignment accounting summary

Continuous Assessment/Further Study

Type: Homework

Instruction: Prepare the following accounts in the books of the consignor:

1. On 1st March 2023, Mr. C of Lagos consigned 200 units of product X to Mr. D of Abuja at a cost of ₦200 per unit.
2. Mr. C paid freight ₦1,000 and insurance ₦500.
3. Mr. D sold 150 units at ₦300 per unit.
4. Mr. D incurred selling expenses of ₦800 and is entitled to a 5% commission on gross sales.
5. Mr. D remitted the balance due to Mr. C.

Prepare the following accounts in Mr. C’s ledger:

1. Consignment Account
2. Goods Sent on Consignment Account
3. Mr. D’s Account

Lesson Keywords

• Consignment – An arrangement where goods are sent by one party to another for sale on commission.
• Consignor – The owner of the goods who sends them for sale.
• Consignee – The agent who receives goods for sale and earns commission.
• Commission – A fee paid to the consignee for selling the goods.
• Proforma Invoice – A document sent by the consignor to the consignee, detailing the goods sent.

Differentiation

Support for weaker learners: Provide simpler, step-by-step examples and templates for preparing the accounts. Focus on understanding each entry before combining them. Encourage peer tutoring.

Extension for faster learners: Provide more complex scenarios involving abnormal losses, valuation of unsold stock, or different types of commission (e.g., del credere commission) for them to analyze and prepare accounts.

Suggested Lesson Videos

Search YouTube for: “Consignment Account entries in consignor’s books SS3 Financial Accounting”

Teacher Guide for Using This Lesson Plan

Before the lesson, ensure you have charts depicting the formats of the Consignment Account, Goods Sent on Consignment Account, and Consignee’s Account. Begin by reviewing basic double-entry principles to ensure students are prepared. Discuss each type of entry in the consignor’s books systematically, demonstrating with clear examples on the board. Encourage students to actively participate in preparing the accounts. Guide them through Example 1, then allow them to attempt similar problems individually or in pairs. The Board Summary should be copied after the main teaching points have been thoroughly explained and discussed. Pay close attention to common errors such as incorrect debit/credit entries or miscalculation of commission or profit/loss. Provide immediate feedback and clarification. For safety, ensure the classroom is well-lit and comfortable for learning.