Expenses on Consignment

A consignment attracts two separate streams of expenditure — one incurred by the consignor before the goods leave his hands, and one incurred by the consignee after the goods reach him. Both streams are debited to the Consignment Account in the consignor's books because, whoever pays them, the expense economically belongs to the consignor's goods; but the two streams are not treated alike when it comes to valuing unsold stock, which is why the distinction matters so much in this chapter.

Consignor's expenses are amounts the consignor pays before or at the point of despatch — packing, carriage/freight to the port or to the consignee's place, marine or transit insurance, forwarding charges, and so on. These are always direct expenses, because they are incurred to bring the goods to a saleable condition and location; they are added to cost while valuing any unsold stock.

Consignee's expenses fall into two further sub-categories:

• Non-recurring (direct) expenses — incurred once, on the entire lot received, before the goods are actually put up for sale: unloading charges, octroi/customs duty, carriage from the port/station to the consignee's godown, and clearing charges. Being expenses that add value to the goods on their way to the point of sale, these too are included while valuing unsold stock. …