Distinguish between a consignment and a sale under any four heads.

Question

Accepted Answer

A consignment and a sale both involve the physical movement of goods from one person to another, which is why students preparing for TSBIE Class 12 Accountancy sometimes confuse the two at first — but the legal and accounting substance is entirely different.

| Basis | Consignment | Sale |
|---|---|---|
| Ownership | Remains with the consignor until the consignee actually sells the goods to a third party | Passes from seller to buyer as soon as the sale is completed |
| Relationship | Principal and agent | Debtor and creditor (once sold on credit) |
| Risk | Stays with the consignor throughout | Passes to the buyer along with ownership |
| Right of return | Unsold goods can be returned by the consignee to the consignor | Goods once sold generally cannot be returned except by special agreement |
| Document | Proforma invoice (not a demand for payment) | Regular sale invoice (a demand for payment) |
| Profit/Loss | Belongs entirely to the consignor; the consignee earns only a commission | Belongs entirely to the seller who made the sale |

Any four of the above rows, correctly explained, fully answer the question.

> [!ANSWER] Consignment: principal–agent relationship, ownership/risk stays with consignor until actual sale, unsold goods returnable, moves under a proforma invoice. Sale: debtor–creditor relationship, ownership/risk passes to the buyer at once, goods not normally returnable, moves under a regular sale invoice.

Basis	Consignment	Sale
1. Ownership	Remains with the consignor until goods are sold to a third party	Passes to the buyer as soon as the sale takes place
2. Relationship	Principal and agent (consignor and consignee)	Seller (creditor) and buyer (debtor)
3. Risk	Borne by the consignor	Borne by the buyer after the sale
4. Return of goods	Unsold goods can be returned to the consignor	Goods are not normally returnable
5. Expenses	Consignor usually bears the expenses	Buyer bears expenses after purchase
6. Statement	Consignee sends an Account Sales	No such statement is sent

Basis of Difference	Consignment	Sale
Transfer of ownership	Ownership of goods remains with the consignor; it does not pass to the consignee	Ownership passes immediately from the seller to the buyer
Relationship between parties	Principal and agent (consignor and consignee)	Seller (creditor) and buyer (debtor)
Risk of goods	Risk remains with the consignor until the goods are sold	Risk passes to the buyer as soon as the sale is made
Return of goods	Unsold goods can be returned to the consignor	Goods sold cannot normally be returned unless agreed
Document sent	The consignee sends an "Account Sales" to the consignor	The seller sends an "Invoice" to the buyer
Expenses	Expenses incurred by the consignee are generally borne by the consignor	Expenses after sale are borne by the buyer

Basis	Consignment	Sale
Ownership of goods	Remains with the consignor until the goods are actually sold to a third party	Passes to the buyer immediately on sale
Relationship	Principal (consignor) and agent (consignee)	Seller and buyer
Risk	Borne by the consignor (except for agreed losses)	Borne by the buyer once the sale is complete
Return of goods	Unsold goods can be returned to the consignor	Goods are not normally returnable unless defective/agreed
Expenses	Consignor usually bears the expenses (directly or by reimbursing the consignee)	Buyer bears expenses after purchase
Statement rendered	Consignee sends an Account Sales	Buyer sends no such statement
Profit / loss	Belongs to the consignor	Belongs to the buyer on resale
Payment	Consignee pays only after goods are sold (or as agreed)	Buyer pays the agreed price (cash or credit)

Basis	Consignment	Sale
Ownership	Remains with the consignor until the goods are sold to a third party	Passes to the buyer immediately on sale
Relationship	Principal and agent (consignor and consignee)	Seller and buyer
Risk	Borne by the consignor (except del-credere arrangements)	Borne by the buyer once sold
Return of goods	Unsold goods can be returned to the consignor	Goods are generally not returnable unless defective
Reward	Consignee earns a commission	Seller earns a profit
Expenses	Consignor usually bears/absorbs consignment expenses	Buyer bears expenses after purchase
Account rendered	Consignee sends an Account Sales	Buyer sends no such statement
Nature	Only a transfer of possession, not of title	Transfer of both possession and title

Q.Distinguish between a consignment and a sale under any four heads.

Concept understanding — Consignment and Its Distinction from an Outright Sale

Consignment vs Sale

Basis	Consignment	Sale
Ownership	Remains with the consignor until the consignee actually sells the goods to a third party	Passes from seller to buyer as soon as the sale is completed
Relationship	Principal and agent	Debtor and creditor (once sold on credit)
Risk	Stays with the consignor throughout	Passes to the buyer along with ownership
Right of return	Unsold goods can be returned by the consignee to the consignor	Goods once sold generally cannot be returned except by special agreement
Document	Proforma invoice (not a demand for payment)	Regular sale invoice (a demand for payment)
Profit/Loss	Belongs entirely to the consignor; the consignee earns only a commission	Belongs entirely to the seller who made the sale

Q.Distinguish between a consignment and a sale under any four heads.

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