UNIT – 2
Consignment Accounts
To consign means TO SEND. Consignment is an AGREEMENT between two parties i.e., Consignor and Consignee, whereby Consignor agrees to send goods to consignee on regular basis for the purpose of sale in exchange of commission and reimbursement of expenses to be paid by consignor to consignee. The party who sends the goods is called CONSIGNOR (Principal). The party to whom the goods are sent is called CONSIGNEE (Agent).
The ownership of the goods i.e., Property in goods remain with consignor. Agent does not become the owner. It means the POSSESSION of the goods is transferred but not OWNERSHIP. On sale, the buyer will become the owner.
Principal does not send invoice to agent he only sends PROFORMA INVOICE which looks like invoice. The object of proforma invoice is to convey information to agent regarding particulars of goods sent. Goods are sold by consignee on behalf of consignor AT THE RISK OF CONSIGNOR. Consignee gets commission for the goods sold and he is not responsible for any Bad Debts that may arise.
If the agent has to be made responsible for any BAD DEBTS that may arise, he is to be paid additional commission called DEL-CREDERE COMMISSION. Such commission is calculated on total sales, not only on credit sales until and unless agreed. Agent sends periodical statement to principal called ACCOUNT SALES. It includes information about sales made by agent, expenses incurred on behalf of principal, commission charged by agent and balance due to principal.
Key Takeaways:
- Consignment is an AGREEMENT between two parties i.e., Consignor and Consignee, whereby Consignor agrees to send goods to consignee on regular basis for the purpose of sale in exchange of commission and reimbursement of expenses to be paid by consignor to consignee.
- If the agent has to be made responsible for any BAD DEBTS that may arise, he is to be paid additional commission called DEL-CREDERE COMMISSION.
An Account sale is the periodical summary sent by consignee to consignor.
It contains:
a) Sales made.
b) Expenses by consignee on behalf of consignor.
c) Commission earned.
d) Unsold inventory left with consignee.
e) Advance payments if any.
f) Balance payment due or remitted
ADVANCE TO CONSIGNEE | SECURITY AGAINST CONSIGNMENT |
Advance is paid by consignee at the time of delivery of goods which is adjusted in full against amount due. | Deposit is in the form of security against goods. In case if unsold inventories are left with consignee, only proportionate security on respect of sold goods is adjusted against amount due and balance security in respect of goods unsold is carried forward. Full amount of security is not adjusted against amount due |
Key Takeaways:
1. An Account sale is the periodical summary sent by consignee to consignor.
CONSIGNMENT | SALE |
Ownership of the goods remains with the consignor. | Ownership of the goods transfer to buyer. |
Consignee can return unsold goods. | Goods sold can be returned only if seller agrees. |
Consignor bears the loss of goods held with consignee. | Buyer have to bear the loss if any after delivery of goods. |
Relationship between CONSIGNOR and CONSIGNEE is that of PRINCIPAL and AGENT. | Relationship between buyer and seller is that of Creditor and Debtor |
Expenses incurred by consignee to keep goods safely are borne by consignor. | Expenses by buyer to keep goods safely is borne by buyer. |
VALUE OF STOCK ON CONSIGNMENT
= Proportionate Cost of Goods + Proportionate Consignor’s Exp + Proportionate Consignee’s Non-Selling Exp.
CONSIGNEE’S EXPENSE
- NON-SELLING EXPENSES (Incurred by consignee before goods reaches at consignee’s place)
Packing, Freight, Carriage inward, Cartage, Octroi, Transit insurance.
- SELLING EXPENSES (Incurred by consignee after goods reaches at consignee’s place)
Godown rent, Godown insurance, Delivery charges, Advertisement & Other selling exp.
VALUE OF GOODS IN TRANSIT
= Proportionate Cost + Proportionate consignors Exp.
NORMAL COMMISSION | OVER-RIDING COMMISSION | DEL-CREDERE COMMISSION |
Given to agent as a reward for his services. | Given to agent for selling goods over and above a targeted price. This type of commission includes agent to sell at higher selling price. | Given to agent for shifting responsibility of collection and risk too. In case if Del-Credere Commission is given, agent bears the loss of Bad Debts (if any) |
NORMAL LOSS
A loss which is unavoidable and essential.
A loss which can be anticipated well in advance
Such loss would be spread over entire consignment. It means good units will bear the normal loss.
ABNORMAL LOSS
A loss which is incurred over and above the normal loss.
A loss which is avoidable.
Such loss would not be spread over entire consignment. It means good units will not bear the abnormal loss.
ABNORMAL LOSS IN TRANSIT does not include consignee’s non-recurring exp.
ABNORMAL LOSS AT CONSIGNEES GODOWN include consignee’s non-recurring expenses.
GOODS RETURNED BT CONSIGNEE does not include consignee’s expenses to return the goods.
Key Takeaways:
- Normal Loss is a loss which is unavoidable.
- Abnormal loss is a loss which is incurred over and above the normal loss.
GOODS SENT ON CONSIGNMENT. Consignment A/c. Dr To GSOC A/C. EXPENSES PAID BY CONSIGNOR Consignment A/c. Dr To Cash/Bank A/c. EXPENSES PAID BY CONSIGNEE Consignment A/c. Dr To Consignee A/c SALES BY CONSIGNEE Consignee A/c. Dr To Consignment A/c EXPENSES & COMMISSION BY CONSIGNEE. Consignment A/c. Dr To Consignee A/c FINAL REMITANCE RECEIVED Cash/Bank A/c. Dr To Consignee A/c
| TRANSFER OF GSOC GSOC A/c. Dr To Trading A/c. GOODS RETURNED BY CONSIGNEE GSOC A/c. Dr To Consignment A/c
ADV. RECEIVED FROM CONSIGNEE Cash/Bank/BR A/c. Dr To Consignee A/c. BR DISCOUNTED Bank A/c. Dr Discount A/c. Dr To BR A/c.
DISCOUNT CHARGED/TRF.TO CONSIGNMENT A/c. Consignment A/c. Dr To Discount A/c.
| NORMAL LOSS NO ENTRY Cost of normal units will be shifted to other Good units and finally borne by customer. ABNORMAL LOSS P&L A/c. Dr. To Consignment A/c
This loss is not shifted to good units but shifted to P&L A/c. It means it is borne by businessman In case if insurance Claim is admitted, entry for abnormal loss will appear as follows Insurance claim. Dr P&L A/c. Dr. To Consignment A/c |
GOODS SENT ON CONSIGNMENT AT INVOICE PRICE
Dr. CONSIGNMENT A/c Cr.
Particulars | Amount | Particulars | Amount |
To Opening stock | Invoice Price | By Opening Stock Reserve | LOADING |
To GSOC(Goods sent) | Invoice Price | By GSOC(Goods sent) | LOADING |
TO GSOC(Goods returned) | LOADING | BY GSOC(Goods returned) | Invoice Price |
To Closing Stock Reserve | LOADING | By Closing Stock | Invoice Price |
GOODS SENT ON CONSIGNMENT AT INVOICE PRICE Consignment A/c. Dr To GSOC A/c. | GOODS RETURNED FROM CONSIGNMENT AT INVOICE PRICE GSOC A/c. Dr To Consignment A/c. |
LOADING ON GOODS SENT ON CONSIGNMENT AT INVOICE PRICE GSOC A/c. Dr To Consignment A/c. | LOADING ON GOODS RETURNED FROM CONSIGNMENT AT INVOICE PRICE Consignment A/c. Dr To GSOC A/c. |
GOODS RECEIVED ON CONSIGNMENT.
NO ENTRY
EXPENSE PAID BY CONSIGNOR
NO ENTRY
EXPENSES PAID BY CONSIGNEE.
Consignor A/c. Dr
To Cash/Bank A/c.
CASH SALES MADE BY CONSIGNEE.
Cash/Bank A/c. Dr
To Consignor A/c.
CREDIT SALES MADE BY CONSIGNEE.
Consignment Debtor A/c. Dr
To Consignor A/c.
COLLECTION FROM CONSIGNMENT DEBTOR.
Cash/Bank A/c. Dr
To Consignment Debtors A/c.
COMMISSION CHARGED.
Consignor A/c. Dr
To Commission / Del-credere commission A/c
AMOUNT PAID TO CONSIGNOR.
(advance or final remittance)
Consignor A/c. Dr
To Cash / Bank / BP A/c
BAD DEBTS
(a) If Del-Credere Commission is charged
Del-Credere A/c. Dr.
To Consignment Debtors A/c
(b) If Del-Credere Commission is NOT charged
Consignor A/c. Dr.
To Consignment Debtors A/c.
Q.1. RAWAL RATAN SINGH of Chittorgarh consigned 1000 units of 100 each to RANI PADMAVATI of SINGHAL. Expense made by RAWAL RATAN SINGH in such consignment are Rs. 20,000.
RANI PADMAVATI paid unloading charges Rs. 5,000 and Rs.2 P.U. selling expenses.
She sold all the goods at Rs.140 each and deducted 5% as commission and remitted draft for the balance. Prepare Ledger accounts in the books of Consignor.
SOLUTION: -
Ledger of Rawal Ratan Singh (Consignor)
Dr. CONSIGNMENT A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Goods sent on Consignment (1000 X 100) | 1,00,000 | By Padmavati (Sales-1000 X 140) | 1,40,000 |
T0 Cash (1000 X 20) | 20,000 |
|
|
To Padmavati Non selling exp (1,000 X 5) Selling exp (1,000 X 2) |
5,000 2,000 |
|
|
To Padmavati (Comm-1,40,000 X 5%) | 7,000 |
|
|
To P&L (Bal.Fig) | 6,000 |
|
|
|
|
|
|
TOTAL | 1,40,000 | TOTAL | 1,40,000 |
Dr. PADMAVATI A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Consignment | 1,40,000 | By Consignment | 6,600 |
|
| By Consignment | 5,600 |
|
| By Bank (Bal.Fig) | 1,27,800 |
|
|
|
|
TOTAL | 1,40,000 | TOTAL | 1,40,000 |
Dr. Goods Sent On Consignment A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
|
| By Consignment | 1,00,000 |
To Trading (transfer) | 1,00,000 |
|
|
TOTAL | 1,00,000 | TOTAL | 1,00,000 |
Q.2. On 15 Jan, 2013 J&K Co. of Mumbai sent to Muku & Co. of Kolkata 400 bicycle at an invoice price of Rs.100 per bicycle to be sold on commission. Freight and insurance were Rs.600.
Accounts sale was received from consignee as follow: -
15 March - 100 per bicycle were sold @ Rs.145 on which 5%. Commission and Rs.375 for expenses were deducted.
10 April - 150 per bicycle were sold @ Rs.140 on which 5%. Commission and Rs.290 for expenses were deducted.
From the above information prepare Consignment A/c in the books of J&K Co. and close it on 30 April, 2013 keeping in mind that no salves were made afterwards. Also show accounts in the books of Muku & Co.
Solution: -
Ledger of J&K CO. (Consignor)
Dr. CONSIGNMENT A/c Cr.
DATE | PARTICULAR | AMOUNT | DATE | PARTICULAR | AMOUNT |
2013 |
|
| 2013 |
|
|
Jan 15 | To GSOC | 40,000 | Mar. 15 | By Muku (sales) | 14,500 |
Jan 15 | To Cash/Bank (J&K exp.) | 600 | Apr. 10 | By Muku (sales) | 21,000 |
Mar. 15 | To Muku (exp.) | 375 | Apr. 30 | By Stock on Consignment | 15,225 |
Mar. 15 | To Muku (commission) | 725 |
|
|
|
Apr. 10 | To Muku (exp.) | 290 |
|
|
|
Apr. 10 | To Muku (commission) | 1,050 |
|
|
|
Apr. 30 | To P&L (Bal. Fig.) | 7,685 |
|
|
|
|
|
|
|
|
|
| TOTAL | 50,725 |
| TOTAL | 50,725 |
Dr. MUKU’s A/c (Consignee) Cr.
DATE | PARTICULAR | AMOUNT | DATE | PARTICULAR | AMOUNT |
2013 |
|
| 2013 |
|
|
Mar. 15 | To Consignment (Sales) | 14,500 | Mar. 15 | By Consignment (expense) | 375 |
Apr. 10 | To Consignment (Sales) | 21,000 | Mar. 15 | By Consignment (Commission) | 725 |
|
|
| Apr. 10 | By Consignment (expense) | 290 |
|
|
| Apr. 10 | By Consignment (Commission) | 1,050 |
|
|
| Apr. 30 | By Balance c/d | 33,060 |
| TOTAL | 35,500 |
| TOTAL | 35,500 |
Dr. Goods sent on Consignment A/c Cr.
DATE | PARTICULAR | AMOUNT | DATE | PARTICULAR | AMOUNT |
2013 |
|
|
| 2013 |
|
Apr. 30 | To Trading A/c (transfer) | 40,000 | Jan. 15 | By Consignment | 40,000 |
|
|
|
|
|
|
| TOTAL | 40,000 |
| TOTAL | 40,000 |
LEDGER OF MUKU & CO. (Consignee)
Dr. J&K Co. A/c Cr.
DATE | PARTICULAR | AMOUNT | DATE | PARTICULAR | AMOUNT |
2013 |
|
| 2013 |
|
|
Mar. 15 | To Cash/Bank (expense) | 375 | Mar. 15 | By Cash/Bank (Sales) | 14,500 |
Mar.15 | To Commission | 725 | Apr. 10 | By Cash/Bank (Sales) | 21,000 |
Apr. 10 | To Cash /Bank (expense) | 290 |
|
|
|
Apr. 10 | To Commission | 1,050 |
|
|
|
Apr. 30 | To Balance c/d | 33,060 |
|
|
|
|
|
|
|
|
|
| TOTAL | 34,500 |
| TOTAL | 34,500 |
Dr. COMMISSION A /c Cr.
DATE | PARTICULAR | AMOUNT | DATE | PARTICULAR | AMOUNT |
2013 |
|
| 2013 |
|
|
Apr. 30 | To P&L (Bal.Tfd.) | 1,775 | Mar.15 | By J&K (14,500 X 5%) | 725 |
|
|
| Apr. 10 | By J&K (21,000 X 5%) | 1,050 |
|
|
|
|
|
|
| TOTAL | 34,500 |
| TOTAL | 34,500 |
Working note: -
Closing Stock
Cost of Goods Sent.
- Quantity sent 400
Cost of Goods (400 X 100) 40,000
Add: - J&K Co. Expense 600
b) Total Cost 40,600
c) Quantity Sold 250
d) Quantity in stock 150
e) Closing Stock - Cost
= Total Cost X Quantity in Stock / Quantity Sent
= 40,600 X 150/400
= 15,225
Note: - It is assumed that the consignee's expenses are incurred after the goods have reached their godown and hence not included in valuation of stock.
Q.3. On 1st November,2015, A of Calcutta sends goods costing Rs.1,00,000 to B of Delhi on Consignment basis. A paid Rs. 5,000 as freight and Rs. 2,000 as insurance.
On 31st December,2015, an Account Sales was received from B disclosing that the entire quantity of goods was sold for Rs.1,50,000 out of which Rs. 30,000 was sold on credit A customer who purchased goods for Rs. 5,000 failed to pay and the debt proved bad. All other debts were collected by B in full. As per the agreement, B is allowed a commission @ 10% on sales. B sends the amount due to A by cheque.
Prepare necessary Ledger accounts in the books of A & B.
Solution: -
LEDGER OF A
Dr. CONSIGNMENT A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Goods sent on Consignment | 1,00,000 | By B’s (Cash sales) | 1,20,000 |
To Cash/Bank Freight. 5,000 Insurance. 2000 | 7,000 | By B’s (Cr. Sales) | 30,000 |
To B's (commission) (10% of 1,50,000) | 15,000 |
|
|
To B's A/c (Bad debt) | 5,000 |
|
|
To P&L A/c (bal.fig.) | 23,000 |
|
|
|
|
|
|
TOTAL | 1,50,000 | TOTAL | 1,50,000 |
Dr. B's A/c. Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Consignment (Cash sales) | 1,20,000 | By Consignment (commission) | 15,000 |
To Consignment (Cr. Sales) | 30,000 | By Consignment (bad debts) | 5,000 |
|
| By Bank A/c (Remittance) | 1,30,000 |
|
|
|
|
TOTAL | 1,50,000 | TOTAL | 1,50,000 |
Dr. Goods sent on Consignment A/c. Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Trading A/c (transfer) | 1,00,000 | By Consignment A/c | 1,00,000 |
TOTAL | 1,00,000 | TOTAL | 1,00,000 |
LEDGER OF B
Dr. A’s A/c. Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Commission | 15,000 | By Cash/ Bank (Sales) | 1,20,000 |
To Consignment Debtors (Bad debts- no del credere comm) | 5,000 | By Consignment Debtors (Cr. Sales) | 30,000 |
To Cash/Bank (Remittance) | 1,30,000 |
|
|
TOTAL | 1,50,000 | TOTAL | 1,50,000 |
Dr. CONSIGNMENT DEBTORS A/c Cr.
PARTICULAR | AMOUNT | PARTICULAR | AMOUNT |
To A's | 30,000 | By Cash/Bank (collection) | 25,000 |
|
| By A's (Bad debts no del cr. commission) | 5,000 |
TOTAL | 30,000 | TOTAL | 30,000 |
Q.4 Refer to question 3. Prepare the necessary ledger account, if in the above question the consignee is given a del credere commission of 5% on sales (In addition to ordinary commission)—other things remaining the same.
SOLUTION: -
LEDGER OF A
Dr. CONSIGNMENT A/c. Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To GSOC | 1,00,000 | By B’s (Cash sales) | 1,20,000 |
To Cash/Bank Freight. 5,000 Insurance 2000 | 7,000 | By B's (Cr. Sales) | 30,000 |
To B's (commission) (10% of 1,50,000) | 15,000 |
|
|
To B's (Del-Credere Commission) | 7,500 |
|
|
To P&L (bal.fig.) | 23,000 |
|
|
TOTAL | 1,50,000 | TOTAL | 1,50,000 |
Dr. B's A/c. Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Consignment (Cash sales) | 1,20,000 | By Consignment (commission) | 15,000 |
To Consignment (Cr. Sales) | 30,000 | By Consignment (Del-cr. commission) | 7,500 |
|
| By Cash/Bank(Remittance) | 1,27,500 |
TOTAL | 1,50,000 | TOTAL | 1,50,000 |
Dr. Goods sent on Consignment A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Trading A/c (transfer) | 1,00,000 | By Consignment A/c | 1,00,000 |
TOTAL | 1,00,000 | TOTAL | 1,00,000 |
LEDGER OF B
Dr. A's A/c. Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To commission | 15,000 | By Cash/ Bank (Sales) | 1,20,000 |
To Del credere commission | 7,500 | By Consignment Debtors (Cr. Sales) | 30,000 |
To Cash/Bank (Remittance) | 1,27,500 |
|
|
TOTAL | 1,50,000 | TOTAL | 1,50,000 |
Dr. CONSIGNMENT DEBTORS A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To A's | 30,000 | By Cash/Bank (collection) | 25,000 |
|
| By A's (Bad debts Adjusted) | 5,000 |
TOTAL | 30,000 | TOTAL | 30,000 |
Dr. Del Credere Commission A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Consignment Debtors (Bad Debts) | 5,000 | By A's | 7,500 |
To P&L (Bal. Fig) | 2,500 |
|
|
TOTAL | 7,500 | TOTAL | 7,500 |
Dr. COMMISSION A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To P&L (Bal. Fig) | 15,000 | By A's | 15,000 |
TOTAL | 15,000 | TOTAL | 15,000 |
Dr. PROFIT & LOSS ACCOUNT Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Profit c/d to B/S | 17,500 | By Commission | 15,000 |
|
| By Del Credere Commission (Net trfd.) | 2,500 |
TOTAL | 17,500 | TOTAL | 17,500 |
Q.5. Amit of Mumbai consigned 100 sewing machines to Sanjay of Surat to be sold on his risk. The cost of one machine was Rs.150, but the invoice price was Rs.200. Amit paid freight Rs. 600 and insurance in transit Rs.200
Sanjay sent a draft to Amit for Rs. 10,000 as advance and later sent an account sales showing that 80 machine were sold at Rs.220 each. Expenses incurred by Sanjay were carriage inward Rs. 25, Octroi Rs.75, godown rent Rs.500 and advertisement Rs.300. Sanjay is entitled to a commission of 5% on sales.
Journalise the above transaction in the books of Amit and Sanjay.
SOLUTION: -
LEDGER OF AMIT
Dr. CONSIGNMENT A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To GSOC | 20,000 | By Sanjay (Sales) | 17,600 |
To Cash/Bank (Amit expenses) | 800 | By Stock on Consignment | 4,180 |
To Sanjay (Expenses) | 900 | By GSOC (Load) | 5,000 |
To Sanjay (Commission) | 880 |
|
|
To Stock Reserve c/d | 1,000 |
|
|
To P&L(bal.fig.) | 3,200 |
|
|
TOTAL | 26,780 | TOTAL | 26,780 |
Dr. SANJAY A/c. Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Consignment (Cash Sales) | 17,600 | By Cash/ Bank (Advance) | 10,000 |
|
| By Consignment (Expenses) | 900 |
|
| By Consignment (Commission) | 880 |
|
| By Balance c/d | 5,820 |
TOTAL | 17,600 | TOTAL | 17,600 |
Dr. Goods sent on Consignment A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Consignment | 5,000 | By Consignment A/c | 20,000 |
To Trading A/c (transfer) | 15,000 |
|
|
TOTAL | 20,000 | TOTAL | 20,000 |
LEDGER OF SANJAY
Dr. AMIT A/c Cr.
PARTICULAR | AMOUNT | PARTICULAR | AMOUNT |
To Cash/ Bank (Advance) | 10,000 | By Cash/ Bank | 17,600 |
To Cash/ Bank (Expenses) | 900 |
|
|
To Commission | 880 |
|
|
To Balance c/d | 5,820 |
|
|
TOTAL | 17,600 | TOTAL | 17,600 |
Q.6. On 1st July,2016, Rustom House of Ahmedabad consigned 100 keyboards to TCS of Mumbai. The cost of each keyboard was Rs.450 but the pro forma invoice price was Rs.600. Rustom House paid Rs.3000 for freight and insurance. On 7th July,2016, TCS accepted a 3 months’ bill drawn upon them by Rustom House for Rs. 30,000. TCS paid Rs. 1,200 as rent and Rs.750 for advertisement and up to 31st December,2016(On which Rustom House closes their books) they sold 80 keyboards @ 615 each. TCS were entitled to a commission of 5% on sales.
Show the ledger accounts recording the above transaction in the books of Rustom House and TCS
SOLUTION: -
LEDGER OF Rustom House
Dr. CONSIGNMENT A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To GSOC | 60,000 | By TCS (Sales) | 49,200 |
To Cash/Bank (Rustom House expenses) | 3,000 | By Stock on Consignment | 12,600 |
To TCS (Expenses) | 1,950 | By GSOC (Load) | 15,000 |
To TCS (Commission) (49,200 X 5%) | 2,460 |
|
|
To Stock Reserve (Load) | 3,000 |
|
|
To P&L(bal.fig.) | 6,390 |
|
|
TOTAL | 17,600 | TOTAL | 17,600 |
Dr. TCS A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Consignment (Cash Sales) | 49,200 | By Bills Receivable (Advance) | 30,000 |
|
| By Consignment (Expenses) | 1,950 |
|
| By Consignment (Commission) | 2,460 |
|
| By Balance c/d | 14,790 |
TOTAL | 49,200 | TOTAL | 49,200 |
Dr. Goods sent on Consignment A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Trading A/c (transfer) | 45,000 | By Consignment A/c | 60,000 |
To Consignment | 15,000 |
|
|
TOTAL | 60,000 | TOTAL | 60,000 |
LEDGER OF TCS
Dr. Rustom House A/c Cr.
PARTICULARS | AMOUNT | PARTICULARS | AMOUNT |
To Bills Payable (Advance) | 30,000 | By Cash/ Bank(Sales) | 49,200 |
To Cash/ Bank (Expenses) | 1,950 |
|
|
To Commission | 2,460 |
|
|
To Balance c/d | 14,790 |
|
|
TOTAL | 49,200 | TOTAL | 49,200 |
Q.7. D. Dogra of Delhi sent to his agent, M. Monga of Madras, 500 articles costing Rs.15/- per article at an invoice price of Rs.20 per article. The following payments were made by D. Dogra in this connection: freight and carriage Rs. 450, miscellaneous exp. Rs. 50. M. Monga sent a bank draft for Rs. 3,000 as an advance against the Consignment M. Monga sold 300 articles at a flat rate of Rs.28 per article and sent an Account Sales showing deduction for storage charges Rs.550 insurance Rs.550 and his Commission of 3% plus 2% Del Credere on gross sale proceeds, and remitted the amount due on consignment. M. Monga also informed D. Dogra that 50 articles were damaged in transit and thus they were valued at Rs.550. Journalise the above transactions in the books of the consignor and consignee.
SOLUTION: -
Books of Dogra (Consignor)
Journal
|
|
|
| Dr. | Cr. |
|
| Rs. | Rs. | ||
(1) | Consignment to madras A/c Dr | 7,500 |
| ||
| To Goods sent on Consignment A/c |
| 7,500 | ||
(500 articles sent to M. Monga, Agent, Cost being Rs.15 per article). | |||||
(2) | Consignment to Madras A/c Dr | 500 |
| ||
| To Bank Account |
| 500 | ||
(Expenses incurred on the Consignment) | |||||
| Freight & Carriage | Rs. | 450 |
|
|
| Miscellaneous Exp. | Rs. | 50 |
|
|
|
|
| 500 |
|
|
(3) | Bank Account Dr | 3,000 |
| ||
| To M. Monga |
| 3,000 | ||
(Advance received from the Agent in the form of Bank Draft.) | |||||
(4) | M. Monga Dr | 8,400 |
| ||
| To Consignment to Madras A/c |
| 8,400 | ||
(Sales affected by M. Monga as per Account Sales.) | |||||
(5) | Consignment to Madras A/c Dr | 570 |
| ||
| To M. Monga |
| 570 | ||
(Expenses incurred by M. Monga Rs.150 and Commission due to him, Rs.550 (5% of Rs. 8,400). | |||||
(6) | Bank Account Dr | 4,830 |
| ||
| To M. Monga |
| 4,830 | ||
(Amount due from the consignee received.) | |||||
(7) | P & Loss A/c Dr | 350 |
| ||
| To Consignment to Madras A/c |
| 350 | ||
(Abnormal Loss on 50 damaged Articles) | |||||
(8) | Stock on Consignment A/c Dr | 2,850 |
| ||
| To Consignment to Madras A/c |
| 2,850 | ||
| (Value of stock unsold at Madras) |
| Rs. |
|
|
| 150, goods articles, @ Rs.20 |
| 2,250 |
|
|
| Add: Expenses Rs.150 |
| 150 |
|
|
| 50 damaged articles |
| 450 |
|
|
|
|
| 2,850 |
|
|
(9) | Consignment to Madras A/c Dr | 3,030 |
| ||
| To Profit & Loss Account |
| 3,030 | ||
(Profit on consignment transferred to Profit & Loss Account) | |||||
(10) | Goods sent on Consignment A/c | 7,500 |
| ||
| To Trading A/c |
| 7,500 | ||
(Goods sent on consignment A/c closed by transfer to trading Account) | |||||
Books of M. Monga (Consignee)
Journal
|
|
|
| Dr. | Cr. |
|
| Rs. | Rs. | ||
(1) | D.Dogra A/c Dr | 3,000 |
| ||
| To Bank A/c |
| 3,000 | ||
(Advance sent to the Consignor against consignment) | |||||
(2) | D. Dogra A/c Dr | 150 |
| ||
| To Bank A/c |
| 150 | ||
(Expenses incurred on the Consignment on behalf of D. Dogra | |||||
| Storage |
| 50 |
|
|
| Insurance |
| 100 |
|
|
|
|
| 150 |
|
|
(3) | Bank A/c Dr | 8,400 |
| ||
| To D. Dogra A/c |
| 8,400 | ||
(Sale of 300 articles @ Rs.28 each out of the Consignment.) | |||||
(4) | D. Dogra A/c Dr | 420 |
| ||
| To Commission A/c |
| 420 | ||
(5% Commission on Sales made on half of D. Dogra; 3% Commission + 2% Del Credere) | |||||
(5) | D. Dogra A/c Dr | 4,830 |
| ||
| To Bank A/c |
| 4,830 | ||
(Amount due to D. Dogra remitted). | |||||
Q.8. Philips Radio of Calcutta dispatched 1,000 transistors at Rs.700 each to Mohan Bros. of Delhi, the consignors paid freight Rs. 7,500, cartage Rs.500 and insurance Rs.2,500 Mohan Bros. received only 900 sets and incurred he following expenses.
Rs.
Octroi and other Expenses 1,00,000
Cartage 5,000
Sales expenses 6,000
The consignee sold 600 sets only. You are required to calculate the value of closing stock.
SOLUTION: -
Calculation of value of unsold stock
Particulars | Units |
Sets Received | 900 |
Sets Sold | 300 |
Unsold Stock | 600 |
Particulars | Rs. |
Cost of Unsold Stock (300 x 700) | 2,10,000 |
Add: Proportionate expenses of Consignor (7500 + 500 + 2500) x 300/1000 | 3,150 |
Add: Proportionate expenses of Consignee (Octroi & Cartage) (1,00,000 + 5000) x 300/900 | 35,000 |
| 2,48,150 |
Q.9. Deepak sold goods on behalf of Geep Sales Corporation on consignment basis. On 1 January 2002 he had with him a stock of Rs.20,000 on consignment. During the year he received goods worth Rs.2,00,000.
Deepak had instructions to sell goods at cost plus 25% and was entitled to a commission of 4% on sales in addition to 1% del credere commission.
During the year ended 31 December 2002 cash sales were Rs.1,20,000; credit sales Rs.1,05,000; Deepak’s expenses relating to consignment Rs.3,000 being salaries and insurance bad debts amounted to Rs.3,000.
Prepare necessary accounts in the books of Geep Sales Corporation.
SOLUTION: -
Solution : |
|
|
|
In the books of Geep Sales Corporation | |||
Consignment Account | |||
Dr. |
|
| Cr. |
| Rs. |
| Rs. |
To Consignment Stock b/d | 20,000 | By Deepak |
|
To Goods sent on Consignment Account | 2,00,000 | Cash Sales 1,20,000 |
|
To Deepak (Commission) | 9,000 | Credit Sales 1,05,000 | 2,25,000 |
To Deepak (Commission) | 2,250 | By Consignment Stock c/d | 40,000 |
To Deepak (expenses) | 3,000 |
|
|
To Profit & Loss Account |
|
|
|
(Profit) | 30,750 |
|
|
| 2,65,000 |
| 2,65,000 |
Deepak’s Account | |||
Dr. |
|
| Cr. |
| Rs. |
| Rs. |
To Consignment account (Sales) | 2,25,000 | By Consignment account |
|
|
| (Commission) | 9,000 |
|
| By Consignment Account |
|
|
| (Commission) | 2,250 |
|
| By Consignment Account |
|
|
| (Exp.) | 3,000 |
|
| By Balance c/d | 2,10,750 |
| 2,25,000 |
| 2,25,000 |
Working Notes:
(1) Calculation of Consignment Stock Sale Price = 100 + 25 = 125
Cost of Sales = Sales × 100/125
= 2,25,000 × 100/125
= Rs.1,80,000
Cost of the goods available for sale = Rs. 20,000 + Rs. 2,00,000 = Rs.2,20,000. Hence stock at the end = Rs. 2,20,000 - Rs. 1,80,000 = Rs. 40,000
(2) Since Deepak is paid del-credere commission, bad debts of Rs. 3,000 would be borne by him.
Q.10. S of Bombay consigned 10,000 kg. of oil to D of Calcutta. The cost of oil was Rs.2 per kg. S paid Rs. 5,000 as freight and insurance. During transit 250 kg were accidentally destroyed for which the insurers paid directly to the consignors Rs.450 if full settlement of the claim.
D reported that 7,500 kg were sold @ Rs.3 per kg. The expenses being on godown rent Rs. 200 on advertisement Rs. 1,000 and on salesman salary Rs. 2,000 D. is entitled to a commission of 3% plus 1.5% del credere. D reported a loss of 100 kg. due to leakage. D. settled the accounts by bank draft. Prepare the accounts is the books of S.
SOLUTION: -
Consignment to Calcutta A/c | |||||
Dr. |
|
|
|
| Cr. |
|
| Rs. |
|
| Rs. |
To Goods on Consignment A/c |
| 20,000 | By Bank (Ins. Co.) |
| 450 |
To Bank—Freight & Insurance |
| 5,000 | By P & L A/c (abnormal loss |
| 175 |
To D—Expenses |
| 3,200 | By D— (Sale proceeds) |
| 22,500 |
To D—Commission |
|
|
|
|
|
Ordinary 3% | 675 |
| By Consignment Stock A/c |
| 5,431 |
Del Credere 1.5% | 338 | 1,013 | By P & L A/c—Loss |
| 657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 29,213 |
|
| 29,213 |
Goods Sent on Consignment A/c | |||||
Dr. |
|
|
|
| Cr. |
|
| Rs. |
|
| Rs. |
To Trading A/c |
| 20,000 | By Consignment to Calcutta A/c |
| 20,000 |
Consignment Stock A/c | |||||
Dr. |
|
|
|
| Cr. |
|
| Rs. |
|
| Rs. |
To Consignment Calcutta A/c |
| 5,431 | By Balance c/d |
| 5,431 |
D’s A/c | |||||
Dr. |
|
|
|
| Cr. |
|
| Rs. |
|
| Rs. |
To Consignment to Calcutta A/c |
|
| By Consignment to Calcutta A/c |
|
|
—(sale proceeds) |
| 22,500 | (Exp.) |
| 3,200 |
|
|
| By Consignment to Calcutta A/c |
|
|
|
|
| (commission) |
| 1,013 |
|
|
| By Bank |
| 18,287 |
|
| 22,500 |
|
| 22,500 |
Working Notes: |
|
|
|
|
|
(A) Cost of Goods destroyed |
|
| Rs. |
|
|
Cost of 10,000 kg.@Rs.2 |
|
| 20,000 |
|
|
Freight |
|
| 5,000 |
|
|
Total cost of 10,000 kg. |
|
| 25,000 |
|
|
|
|
|
|
|
|
(B) Value of Stock still unsold |
|
|
|
|
|
Quantity received by D (Excluding accidental loss) | 9,750 |
|
| ||
Less: Normal Leakage |
|
| (100) |
|
|
|
|
| 9,650 |
|
|
Cost of 9,650 kgs (25,000-625) | Rs. 24,375 |
|
| ||
Cost of 2,150 kgs (24,375 / 9650 x 2150) |
|
| Rs. 5,431 |
|
|
|
|
|
|
|
|
References:
- Accounting Notes of Delhi University/Mumbai University.
- Accountingnotes.com
- Accounting Article Library.
- Financial Accounting by B.B. Dam
