If the second method ([see page 455]) of making the consignor’s record is used, the entries under No. 1 will appear as follows:
| Consignment, I. M. Factor, No. 1 | 1,250.00 | ||
| Consignments-Out | 1,250.00 | ||
| Cartage | 15.00 | ||
| Insurance | 25.00 | ||
| Cash | 40.00 | ||
and No. 4 would be:
| Freight | 52.50 | ||
| Sales Allowances | 27.30 | ||
| Commissions | 96.00 | ||
| I. M. Factor | 1,424.20 | ||
| Sales | 1,600.00 | ||
| Consignments-Out | 1,250.00 | ||
| Consignment, I. M. Factor, No. 1 | 1,250.00 | ||
| To reverse. | |||
In these last entries made under the second method, consignment sales are included in the regular Sales account, and the profit or loss is merged with that from regular sales.
Decision as to which of the two accounting methods should be used must be made according to the information desired by the principal. Where consignment transactions are a side line, the record is usually kept by the first method which shows the profit or the loss on each transaction and thus furnishes valuable information for executives. This is sometimes called the occasional consignment theory or method. Where the consignment transaction is the usual method of effecting sales, the second method illustrated above is generally to be followed, because by this method all consignment transactions are properly included in the regular sales and expense records.
CHAPTER XLIX
ADVENTURE SALES
Adventure Transactions.—Before the day of easy transportation and communication between markets, adventure or venture undertakings were quite common. The inherent willingness of men to take a chance, and the desire to speculate, often led to the fitting out of cargoes of merchandise for sale in distant ports and the equipping of trading expeditions into unknown regions. Many dangers had to be met, the hazards and risks being great. Success attended many adventurers, and many also met with failure. Even today this method of seeking a market has its allurements.
Single and Joint Ventures.—Adventures are of two kinds, single and joint. The single adventure is merely an outward consignment by a single proprietor and is treated in accounting as such, i.e., it is charged with all its costs and credited with its returns, the balance being either a profit or a loss. The joint venture is accounted for on the same principle, although the procedure may be much more complicated. A joint venture account may be defined as the record of “commercial transactions of a particular kind, usually of a temporary nature, entered into jointly by several parties who combine together for the purpose, contribute the capital and the services, as may be arranged, and agree to share the losses or profits in certain proportions.” Speculation in stocks, the chartering of a ship for a particular purpose, a particular voyage, or a fixed period of time—these are some lines of present-day joint venture endeavor.
Relations between Parties.—From the legal point of view, the combination under a joint venture is a special partnership, i.e., one entered into for the accomplishment of a special purpose, the several parties to it having control, as in a partnership, and sharing profits and losses either according to contract or, in its absence, equally. Usually, in a joint venture one of the parties or an outside agent is entrusted with the entire enterprise.