Commission
Commission of the consignee is calculated on gross sale made by the consignee. It is a reward to the consignee by the consignor for selling the goods of former. The rate of commission is fixed considering the prevailing market practices and with due agreement between the consignor and consignee.Sometimes goods consigned with insurance coverage may be damaged and the compensation is realized from the insurance company. The compensation received from the insurance company could be treated as sales but no commission is allowed to the consignee on such a realized compensation amount.
Types Of Commission
1. Ordinary Commission/Simple Commission
The commission charged by the consignee on the gross sale proceeds is known as ordinary or simple commission. It is calculated at fixed percentage of total sales.
Commission = Gross sales X Fixed rate percent of commission
2. Del-credere
This type of commission is an additional commission for a endeavor of magnifying sales in the form of credit.It is calculated at a certain predetermined rate of gross sales.
3. Special/Extra/Over-riding Commission
In normal practice, if a consignee sell the goods at the price higher than the normal selling price, he will entitled a commission for excess amount realized over the normal selling price. The commission provided on the excess amount realized over the normal selling price is known as special commission.
