Features of Joint Venture Accounts | Joint Venture vs Consignment (2024)

FAQs

Features of Joint Venture Accounts | Joint Venture vs Consignment? ›

Share of Profit/Loss: In a joint venture, the profit or loss is shared as per the agreement whereas in a consignment the consignee receives a commission based on the sale of goods. Ownership: In a joint venture, the co-ventures are the owners whereas in a consignment only the consignor remains the owner.

Joint Venture: Co-ventures share the profits and losses of the joint venture in their agreed proportion. Consignment: The consignor and consignee do not share profits; the consignee receives a commission.

Features of Consignment

Consignor sends the goods to the consignee or agent for sale at a profit. The consignor is the principal whereas the consignee acts as an agent. The consignee does not buy the goods from the consignee. He needs to give the sale earnings to the consignor after goods are sold and not otherwise.

Meaning of consignment account in English

an account for goods that is sent to a person or company that is not the owner but is responsible for selling them or returning them to the owner if they are not sold: The value of the goods that are sent on consignment are charged to the consignment account.

Improved cash flow: Another advantage of not having to pay upfront for stock is that retailers can improve their cash flow. Access to new inventory to draw in new business: Under a consignment arrangement, consignees gain easy access to risk-free new inventory, which may be a draw for new business.

Consignment account is a Nominal account. It is in fact special Trading and Profit and Loss account and therefore its balance shows the Profit and Loss made on particular consignment. Here its nature is nominal account because all expenses and the transactions relating to trading and sales is been recorded over here.

At its most basic, a joint venture is when two or more businesses agree to work together. It's effectively a commercial agreement between two or more participants, usually entered into in order to achieve specific business goals such as launching a new type of business or selling products into a new market.

What is an example of a consignment? ›

Some types of product are commonly sold through consignment. These include clothing, athletic equipment, furniture, musical instruments, art, and jewelry. For example, an artist might have five large pieces of artwork to sell but has no place to showcase the work for prospective buyers.

Purpose of consignment selling

It can be used as a marketing tool which creates no obligation on the part of the dealer in the event they do not sell.

Consignment is an arrangement between a reseller (consignee) and their supplier (consignor), that allows the reseller to pay for their products after the products have been sold.

Consignment inventory accounting journal entries differ from standard sale and purchase entries. The consignor gives the consignee permission to collect payment on their behalf, but the consignor still owns the inventory and carries the responsibility for the risk of any unsold or obsolete inventory stock.

The consignor prepares the consignment Account, the Goods Sent on Consignment Account and the Consignee's Account in his books, whereas the consignee prepares the Consignor's Account and the Commission Account in his books.

The goods sent on consignment belongs to the consignor as only the possession has passed to the consignee and the ownership still lies with the consignor. So, the balance in the goods sent on consignment account is shown on the asset side in the books of the consignor.

Consignment account is a Nominal account. It is in fact special Trading and Profit and Loss account and therefore its balance shows the Profit and Loss made on particular consignment. Here its nature is nominal account because all expenses and the transactions relating to trading and sales is been recorded over here.

He (Sailesh) spent ` 10 for carriage and ` 40 for godown rent and sold consignment at ` 35 per case. He sent the net amount to Somesh after deducting his expenses and commission at the rate of 5 per cent on the sale proceeds together with his Account sales. Somesh also received ` 180 from the Railway as damages.

Each co-venturer debits the account with the amounts paid by him, and credits the account when he receives amounts. Joint Venture Account is Nominal Account.

- Access to capital: Joint ventures allow companies to pool resources and access capital that might not be available to them individually. Affiliated companies are businesses that are related to each other through common ownership or control.