Introduction to Consignment 📦
Scenario:
- Raj (in Mumbai) manufactures shirts. He wants to sell in Delhi.
- He doesn't have a shop in Delhi.
- He sends 1000 shirts to Simran (in Delhi).
- Simran sells them on Raj's behalf and takes a Commission.
- This arrangement is called Consignment.
Definition: "Consignment is the act of sending goods by the owner (Consignor) to his agent (Consignee) for the purpose of sale."
Key Features 🌟
- Ownership: Remains with the Consignor (Raj) until the goods are sold to the final customer. Simran never owns the shirts.
- Risk: Since ownership is with Raj, the Risk (Fire, Theft) is also with Raj.
- Relationship: Principal and Agent (Not Seller and Buyer).
- Expenses: All expenses (Transport, Insurance) are ultimately borne by the Consignor.
1. Consignor (Principal)"Sends goods. Owns goods. Bears risk."
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2. Consignee (Agent)"Receives goods. Sells goods. Earns Commission."
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3. Customer"Buys goods. Becomes the new Owner."
Consignment vs Sale
In a Sale, ownership transfers immediately. In Consignment, ownership transfers only when the Agent sells to the Customer. Sending goods to Consignee is NOT a Sale.
Quiz Time! 🎯
Test Your Knowledge
Question 1 of 5
1. In consignment, the ownership of goods rests with:
💡 Final Wisdom: "Consignment is a way to expand business without opening new branches. You use someone else's shop and pay them a cut!" 🤝
Next up: Proforma Invoice - The document sent with goods! 📄