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When all the goods sent on consignment have not been sold by the consignee at the time of preparing final accounts by the consignor the unsold stock is brought into books by means of the following journal entry:
Consignment stock account Dr. Consignment account Cr.The consignment stock account is an asset and will be shown in the balance sheet. Next year it will be transferred to the debit side of the consignment account. The principle of valuing stock "cost price or market price whichever is lower" applies to consignment also. Cost price means original cost of the unsold stock plus proportionate amount of the expenses which are necessary to put the goods. In their present value place and condition such as freight, octroi duty, insurance, forwarding charges, carriage up to consignee's godown etc. Generally all expenses incurred till the goods reach consignee's godown etc. Generally all expenses incurred till the goods reach consignee's godown etc are treated as part of the cost whether incurred by the consignee or consignor. Expenses incurred in storage and selling the goods after the goods reach consignee's godown are not to be considered in the cost of the unsold stock (closing stock).
