21. Consignment accounts of live stock and produce commission merchants.—It is evident that an elab orate system of this kind will not be required by com mission merchants who deal in live stock or in farm produce, because of the fact that the goods are usually sold immediately upon receipt and an appropriate ab stract sales journal can be devised which will greatly. simplify the work of bookkeeping.
At the time each lot is received, it will be given a distinguishing number or mark which the salesman will enter upon all sales tickets. An abstract sum mary of the daily sales will be made, and at the end of the day these will be itemized by lot numbers and an entry for the total proceeds of the lot will be made in the abstract sales journal. The entries of the day in the abstract sales journal must, of course, agree in the aggregate with the summary of that day's sales. The check for the proceeds is usually mailed to the shipper on the day on which the goods are sold, and the account of the commission merchant with his ship per is then closed. If this method is followed, it is not necessary to open any general ledger account for the consignees in the books of the factor.
In some instances, as mentioned above, the factor will make advances against goods which have been shipped to him; in this event the advances will be charged to the account of the consignor. As soon as any expenses in connection with the goods have been paid, or any advances have been made, a proper rec ord of the details will be entered in the memorandum consignment record. As any consigned goods are sold, the factor will render an account sales to his principal, unless there is a special agreement between them regulating the time at which accountings are to he made. The details of all sales are noted in the memorandum consignment record, under the head ings of the lots affected, and when the account sales is made up, or a detailed record of the sales is pre pared, it will be entered in an abstract sales journal.
22. Abstract sales journal.—The abstract sales journal, a form for which is shown on page 118, will provide for the following columns: date of sale; ac count sales number; lot number; marks; number of packages received; name of shipper; net proceeds; ad vances; a special column for each kind of charges paid by the factor for the account of the shipper—such as freight, insurance, duty and commission; gross pro ceeds of the sales; folio; name of the party to whom the factor sold the goods; the due date; and a remarks col umn, in which will usually be entered the date on which the customer of the factor made remittance for the sale—this will ordinarily be the date upon which the proceeds are due to be remitted by the factor to his shipper.
23. Posting abstract sales journal.—The gross pro ceeds of the sales will be charged to the account of the customer of the factor from the abstract sales journal; the totals of the columns for freight, storage, insur ance, etc., will be posted at the end of the month to the credit of the respective accounts in the gen eral ledger, where they will offset the payments made previously by the factor. The net proceeds will be credited to the account of the shipper in the consign ment ledger of the factor.
It should be noted that while the factor has charged the amount of the gross proceeds to the debit of those to whom he sold the goods, these amounts cannot be treated in his balance sheet as accounts receivable, since the proceeds, when collected from the customer, must immediately be remitted to the shipper minus any advances or charges due to the factor. The items are not accounts receivable, therefore, and should not be shown as such in the balance sheet of the fac tor. For the same reason, the amounts which are credited to the accounts of shippers, but on which payment is not yet due, because the proceeds have not as yet been collected by the factor, should not be treated in the factor's balance sheet as liabilities.
24. Illegitimate sources of profit.—It is unfortu nately true that factors are not always honest with their shippers, and that there are in this business some illegitimate sources of profits. These take the form of excessive charges against the shipper for freight, duty or storage, or sometimes for claims and allow ances which the factor says that he has met. Some times, too, the factor will report that he has made sales at an average price, instead of stating the actual prices that he has charged, and then he will pocket a part of the proceeds of the sales. In other cases the fac tor may purchase the goods on his own account and sell them on a rising market, thus defrauding the ship per of profits which belong to him.