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i am having trouble understanding the difference between principal -agent vs consignment arrangement.
isnt consignment arrangement same as principal -agent?
then why do dealer recognises revenue and invenntory on sale to customer (in consigner arrangement)
should they just record the commision they are entitled?can u help me with the journal entries too?
thank you:)
Principal v agent – the agent never takes any responsibility for or control of the goods or services – so commission is appropriate
Consignment – also known as sale or return – in practice some responsibility will always be taken – used in motor trade – if I am a BMW dealer, I might have the right to return SOME of the goods but never ALL of the goods – otherwise the manufacturer would not deal with me.
If you decide that the business has control – normal purchase and sale journals apply. Remember though NOT to write journals unless you are asked to.
Language (e.g. consignment is not important, all that matters is that we determine who has control from any given scenario
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