special Accounting Problems Cc ONSIGNMENT ACCou Ts ; Objectives F earning i — m_.. ——$_— "and the concept of consignment; one 4 eet familiar with the special items concerning consign ‘consignment accounts; and 'gnment transactions, ‘agian the meaning of certain key terms, MEANING OF CONSIGNMENT jncreasing size of the market is making more and more difficult for the manufacturer or wholesaler come in direct contact with customers living at far off distances Thi . This has made imy fc ti to enter into an agreement with a reliable local trader who can sell goods on his behalf and atts (Principal) risk for an agreed amount of commission, Such a despatch of goods from one to another person at a different place for the Purpose of warehousing and ultimate sale is temed as consignment. Goods so sent are termed as ‘Goods sent on Consignment’, the sender is ailed “Consignor” and the recipient is called “Consignee”. a For example if A of Mumbai sends 100 radio sets to B of Delhi to sell on his (4’s) behalf and tihis (4's) risk, the transaction between A and B is a consignment transaction. 4 is the ‘consignor” ‘nd Bis the ‘consignee’. Itshould be noted that in the above example, A continues to be the owner of the goods. B is inply an agent of 4. He has not purchased the goods. He has agreed to sell the goods of to the of his ability and capacity. He will, therefore, be responsible to A for payment only when he sold away the goods. Of course, he will be reimbursed by A for any expenses incurred by him in ining and selling the goods besides remuneration for selling the goods as per the agreed terms. The main features of a consignment transaction can now therefore be put as follows: ()) Consignment of goods is not a sale It is mere transfer of possession of goods. (ii) The consignee sells goods at the risk of the consignor. He is not responsible for any loss or destruction of goods. ; a (iii) The sale proceeds belong to the consignor and the consignee merely gets commission i incurred. and expenses that he might have i is that of a Principal and an Agent. (i) The relationship between consignor and consigneProblems. SALE AND CONSIGNMENT / be put as follows: L Special Accountins \ ignment can ' Je and consis! mership of the goo The difference between St Nase of sale, the ee woods acini Oe, (a) Transfer of ownership. in case of consignment» Property og, seller to the buyer. aoa eas till they are sold by the consig! cannot be returned unless they ary ee ‘ (b) Return of goods Sica back. While in case of consignment unsolq ong os seller agrees to take k to the consignor. : with consignee oF a ip bee the seller and the buyer. ity ‘ iship it case bh (6) Nature of relarion te gebtor and creditor While in case of consignmen, sold on credit, is that is that of a principal and an ap. between the consignor and Ben the consignee : Te, the risk also passes with the transfer »y_ (d@) Transfer of risk In case of sal ate , other words, once the goods are sold, buyer will bear the loss even if, ir Be, in the possession of the seller. In case of consignment the ownership does ny consignee and therefore the risk remains with the consignor in the event of, or destroyed. ee ax & ed bac! The relationshi eanaqr Boor IMPORTANT TERMS 1. Proforma invoice It is a statement prepared by the consignor stating quantipy price of goods. It is sent with goods despatched to consignee. ‘A proforma invoice is different from Invoice. 7 Invoice implies that a sale has taken place. It is a statement describing the goods ja. the buyer and showing the total amount due by him to the seller. A proforma iny statement of information in the form of invoice to apprise the party, who has not bow; but shall be having their possession, or dealing with them, of certain essential particulars», Such an invoice in sent by the intending seller to his agent or the intending buyer belo actually takes place. It does not show that the person to whom it is sent is indebted 10 2. Account sales It is a periodical statement rendered by the Consignee to the containing details of goods received, sales made, expenses incurred, commission charged, c= made and balance due by him to the consignor. The following is a specimen of an Ave Account Sales of 50 transistors ex S.8. San Pedro received and sold on account? & Sons, Chicago by: MIS CHIMAN LAL DESAT & C Particulars 40 transistors at %1,200 per transistor 10 transistors at &1,100 per transistor ‘0. MUMBAI 48,000.00 | i,o00.00 | Less: Charges: Dock Dues | caaane ™ | Freight ae Godown Rent "500 Commission at 5 per cent Less: Draft accepted Balance due, Bank draft enclosed E&OE. ‘c For Messrs Chiman Lal i J) Ashol Mumbai, the 15th Jan, 2012 _ a ——$—__$_$_$__$____jssion Itis the remuneration Consignment Accounts | 2.3 pis) d del- Payable to . hes overriding and del-credere, the Consignee for sal sf le made by him. This can be sion is calcul _aple commis: lated as sit Entage 0” total sales. PET ems laid down by th : Soo ai pat Peder to give further incentive, som, i Consignor. Usually this is a + i Pid letimes 1 "on is allowed to consignes an ext : ; sisson Eee in case the sales excood «mmission termed as overriding ota! Sal id Specified amount. It is also calculated of pene the COMSIBNEE AETECS tO meet any Jog, Ss wi re extra i hich , ts, one mo! commission, known as del, the consignor may suffer by reason of eb 2 vf also normally calculated on total sates, Credere commission, is given to consignee. .1. Gopi Cycles (P) Ltd. ation 1. ., Hyderab, sta ment basis to Ramoo of Vijaywada, vatjee 000 names costing £50 each for sale ject to tl i 9 Ny Normal selling price per dynamo 260 0 the following terms: (ii) Consignee’s commission to be calculated as under: (a) 5 per cent on normal selling price: r (0) 1 per cent additional commission if sellin % per cent del- (c) aa cent ‘credere commission on tot ig price is more than normal price; and tal sales for guaranteeing collection of Ramoo reported sales as follows: Cash Sales: 500 dynamos at 60 each Eo Am 200 dynamos at 275 each i i. 15,000 Credit Sales: 400 dynamos at 275 each 30,000 400 dynamos at 280 each 32,000 Total 1.07,000 Ascertain the commission due to consignee. ®) solution: ts STATEMENT OF COMMISSION DUE TO CONSIGNEE is —_ 2 ° 7 Hin 2 : i Nomal (or Simple) Commission: 1,500 = 60 = $/100 $500 Additonal (or Overriding) Commission: 77,000 ~ 1/100 70 <<} Delstedere Commission: 1,07,000 x ‘4/100 = i i fit of 20 per cent on Ilustration 1.2 Goods costing & 6,30,000 were sent out to consignee at @ prof imoice price. Consignee sold 230d goods for & 6,00,000. Consignee was entitled to an ordinary commission of 3 per cent on sales at invoice price and over-riding commission of 20 per a of ‘2y surplus realized, Calculate the amount of consignee’s commission and give the journal entry a ae (CMA Foundation, June 2012) Selution: 7 2,100 __ = ¢ 5,25,000 3 Invoice value of goods sold = 6.30.000 * 3% (190-20) ue = 6,00,000 ~ 5.254 Sa 000 = & 75,000 Suplus of Sale value over invoice val \4 | Special Accounting Probler Consignee Commissio ; z aL Ordinary —_&5,25,000 x75 = 15,750 20 _ Oversiding %75,000 <7, =15,000 = 30,750 Total Commission In the Books of the Consignor Consignee Commission: Consignment A/c To Consignee’s A/c ; 30,750 4. Direct expenses These are expenses which are incurred for placing the goods in, condition. All expenses till the goods reach the godown of the consignee come in sy, These expenses are of a non-recurring nature and increase the value of goods, Examples expenses are freight, carriage, insurance, loading and unloading charges etc. 5. Indirect expenses These are expenses incurred after the goods reach the con godown. They are of a recurring nature and do not increase the value of goods. Examples oj expenses are godown rent, storage charges, advertisement expenses, salaries of salesmen, ex The distinction between direct and indirect expenses is of special importance at the tn valuation of the unsold stock. Direct expenses form a part of the cost and, therefore, a prop such expenses is included in the cost of stock, while the indirect expenses do not form par Cost and, therefore, excluded while valuing the unsold stock. This has been explained in da 6, Advance The consignor may ask the consignee to deposit some money with hin» kept by him as security in respect of the goods sent by him on consignment. It is usualy percentage of the value of goods sent on consignment. For example, if the value of goods s consignment is to be %50,000, and the consignee is asked to deposit (say) 10 per cent ofthe i of goods to be sent, the amount of advance will be %5,000. This covers to certain extent ther the consignor. The amount is adjusted against the amount due from consignee when the aso Dr. 30,750 are finally settled. However, the consignor may like to keep with himself a certain percent value of the goods lying with the consignee. In such a case advance will be adjusted only ie extent of the proportionate goods sold. Example. Goods of 750,000 are sent on consignment to A who sells away 50 per centalt goods for 40,000. Consignor required that 10 per cent of the value of the goods should be as an advance with him. 4’s expenses and commission amount to %5,000. The amount to bes by A will be calculated as follows: Sales Value of the goods a0 Less : Commission and Expenses 5,000 ; Advance deposited 10 per cent of 225,000 2,500 1H Amount to be sent by A 22 vt Thus, 10 per cent of the value stock lying with the consignee Le, 82,500 out of initial #d™** of €5,000 will still remain as advance with the consignor till these goods are finally sold:ment Accounts \ record of all transactioy AP ofit or Net Loss on each ti Na Fron three accounts: Rt consi a : ‘ignment il 'eNt. To atta; is necessary for ascertaini Ww Consignment Account, Nn is objec val ive the consignor usually 0 Consignee’s Account, (3) Goods Sent on Consignment Acco nt, NS relat NE toa Separate congiy. Consignment Account is a No " minal A, aot and RETO, balange Showe gett: His infact a special Consignee’s Account is a Perso Profit or L, Hal Trading and Profit & Loss 08s i al Aon ‘S made on a particular consignment. full, he will and, therefore. |, he Will be 2 a creditor, a debtor, wher Goods sent on Consignment Account is @ Real palance to Purchases Account (sometimes itis also = fe io insferred to the ited the balance due by him in cei ety him nein in case the Consignee has not feas if he has remitted more than Is closed up by transferring its credit side of Trading Account) si: each of these consignments. ‘snment Account will be maintained in respect of pricing of Goods Sent on Consignment Goods can be consigned to the consignee either (i) at cost or (ii) at invoice price. At oa Ch fn case of this method the goods are charged to the consignment at cost price to the consigno! Pp ria invoice is also prepared at this price. For example if the goods costing 10,000 are purchased by A and 80 per cent of such goods are sent by him on consignment to Mumbai, proforma invoice will show the value of goods as %8,000 and the Consignment to Mumbai account will also be charged with this price. The consignee may be given the direction regarding the price at which he should sell the goods (see Illustration 1.3). At invoice price In case of this method the goods are charged to the consignment at a price higher than cost. The proforma invoice also shows the value of goods at such higher price. The excess of invoice price over the actual cost, represents the profit which the consignor intends to make on the goods consigned. For example, if in the above case the goods are consigned at a profit, of 25 per cent on cost (or 20 per cent on invoice price), the consignment account will be charged with 10,000 (i.e., £8,000 + %2,000) for the value of goods sent on consignment. However, in order to find out the profit, at the end of the accounting period, the consignment account will be gen credit with the excess price so charged. In this case, the credit to the usa acco tN ve e200 Ths fact consignment eo seh Sil tte 22.000) ofthe goods sent on consignmnes! ee has also to be made (see Ilustration 1.7). Paft element included inthe sock Wt ae ods to consignee at a price higher than the cost: The following are the advantages OF NVOINE HT the is making on the goods (®) The consignor can keep secret from the consignee I Prptition in the fel sold, thus reducing the possibil ity of bringing more compen” is prev ; rected vocal The goods atthe invoice price ony. Thus, hes pre oa (ii) The consignee can be direc = from different customers. Ky from charging ae consignee becomes Slightly easier. The value of stock with the | (ii) Control over stock with theoat Vo 2.6 | Special Accounting Problems consignee at any time will be the difference between the value of goods Sent on Cong and the sales made by him. i The accounting entries to be recorded in the books of the Consignor in boy, wn being explained in the following pages. ety, Book of Consignor y JOURNAL ENTRIES Transaction Debit Cred (1) | When Security is asked Bank or Cash or B/E. Consignee’s aj (2) | When goods are sent: Consignment A/c. Good sent on Cons (a) at cost. (with cost price)". (6) at Invoice Price. (0 Consignment A/c. Goods sent on Cons, (at invoice pricey In order to bring down the goods sent —_| (ii) Goods sent on Consignment A/c on consignment to cost, an adjustment | Consignment A/e. entry will be necessary. (withthe difference between invoice price ang (3) | For expenses incurred by the consignor. | Consignment A/c. Cash A/c. Me, (4) | When goods are received by the consignee. | No entry (5) | When Account Sales is received from the consignee: (@) for sales made by Consignee. Consignee’s A/c. Consignment Ac (6) for expenses incurred by Consignee. | Consignment A/c. Consignee’s A/c, (c) for commission. Consignment A/c. Consignee’s Ac (6) | If bad debts incur and consignee is a del-credere agent. No entry (7) | When bad debts take place and consignee is not a del-credere agent. Consignment A/c. Consignee’s A/c (because he was debited wip total sales) Transaction Debit Credit (8) | For stock in the hands of the consignee: | Stock on Consignment A/c, (@) If the goods were sent at cost. Consignment A/c. (b) If the goods were sent in invoice price. In order to write-off the unrealised profit on stock an adjusting entry will be necessary. The balance of Stock Reserve A/c will be carried to the B/S and will be deducted from the value of stock on consignment, In the following period, the consignment stock of last period will be transferred to the debit side of the consignment account. The stock reserve on such stock will be (with cost price) (i) Stock on Consignment A/c. (with invoice price) (ii) Consignment A/c, Stock Reserve Alc. (with the difference between invoice price of stock and cost price) Consignment Ale transferred to the credit side of that account, eeea Debit consignee ire consignee owes money he ‘will pay it in cash of send B/E ete, if the consignor owes money to the | Cone: consignee, he will pay him in cash or | nM’ Ale. Cash of BIE Ale. send BIE. cin case accounts are NOt Settled the talance of Consignee’s Account will be daried forward). 0 ifthe BIE received from the consignee Bank A/c ("is discounted. Discount A/c. a ‘The discount Alc is closed by transferring | P & L A/c A ito P& LA . Discount Ale. ‘The consignment account will be closed by transferring the balance (i.e., Profit or Loss) to P & LAV (a) In case of profit. (6) In case of a large number of consignment accounts, a separate “Profit & Loss on Consignment A/c’ can be opened, Profit or Loss on each individual Consignment A/c will be transferred to this, account and ultimately the balance of this account will be transferred to P & L A/c. —aement oF acount With the Ba anklCash or B/E. Consignee's Ae @ BIE Alc. i) Consignment A/c. P& LAV. For loss a reverse entry will be passed (13)| Goods sent on Consignment A/c will be | Goods sent on Purchases A/c or closed by transferring its balance to Consignment A/c. Trading A/c. Purchases or Trading A/c. 14) | "Consignment Stock A/c” will appear as an asset in the Balance Sheet. _| Ilustration 1.3. On Ist April, 2016, Aditya Mills Ltd., Delhi, consigns 500 pieces of shirting costing 75,000 to Birla Stores, Mumbai. The consignee is entitled to 5% selling commission and 1% del-credere commission. Following expenses were incurred by the consignor: z Carriage 200 Insurance 100 Freight 150 Aditya Mills Ltd. draws a Bill of Exchange for €2,000 on Birla Stores, Mumbai, which was Aly accepted by them. It is discounted for %1,950. On 31st May, 2016, Birla Stores send the Account Sales which shows that they have sold 0ods for 27,500 and paid expenses ‘amounting to 150. Stock in Consignee’s hands on 31st May, 2016 is valued at 1,500. _ Bitla Stores enclose a sight draft with th ls Ltd. Give journal entries and ledger ace e Account Sales, for the net amount due to Aditya ‘ounts in the books of the consignor.MBAL AC ‘COUNT Cr. DateT~ To Goods sent on 5,000.9 | 20! | ——Panticatars J ao | Consignment 80 | May 31 |p so cash (Expenses) sy a Stores, Mumbai 7,500.00 45 NY St ‘o Birla Stores, Mumbai ii ‘ck on Consignment | 1,500.00 (Expenses) 0 Bil Stores, Mumbai 450.09 oy (Commission) To P&L Alc 2,950.00 (transfer of Profit) 3,000.05 a BIRLA Stone ———— Parada ~ MUMBAI ACCOUNT gE] tek Tao} Dae Particulars z jo 3! a Jan 1] By Balance bid [ 6 2 4) | co consignment Alc 7,500.00 te | 226.000 (Sale proceeds) moe’ | April) By Bills Receivable A/c 2,000.00 By Consignment A/c 150.00 (Expenses) \ By Consignment A/c 450.00 ' (Commission) By BR 7,500.00 IF oy GOODS SENT ON CONSIGNMENT ACCOUNT cr SS = Foe | Particulars z Date Particulars T= Tan31_ | To Bank 1,60,020 [Jan 1 | By Balance b/d Ise 016 2016 2,26,000 Dec.31 | To Consignment A/e 5,000.00 | April _| By Consignment A/c 5,000.00 VALUATION OF UNSOLD STOCK Where all the goods have not been sold, it becomes necessary to value the unsold goods. Such mods are similar to closing stock in case of a Trading Account. This stock should be valued at a rice which will include: (i) proportionate cost price; and | (i) proportionate direct expenses, i.e., proportionate expenses incurred both by the consignor and the consignee till the goods reach the godown of the consignee. |i should be noted that direct expenses will include all expenses incurred by the consignor While only such expenses of the consignee which are incurred by him till goods reach his godown, “amples of such expenses are: carriage charges, freight, octroi, import duty, etc. paid by the ‘onsignee, Expenses like godown rent, selling expenses, insurance of the godown ete. paid by the “rsignee, should be excluded. Moreover, the fi am tal principle of accounting regarding valuation of stock should also en into consideration he rrock chould be valued at cost or market price whichever is less. Price stands for cost + proportionate direct expenses. Cos,GRATE i 2.10 | Special Accounting Problems inatii i details regardin i tion question, the 8 expe .. In case in an examinat fe on . Tutorial ee ot been given (e.g., the question aos xp es incurred ing | the consignes | “the consignee paid 22,000 as cartage, 80 owt a insurance ooo oa ac 5 A a ; are cae to consider only proportionate expenses incurre\ Ny onsignoy ered eek are a k. a unsold soc 4 transistors to H. Singh. Each tr Illustration 1.4. G. Mehta consigns 100 ANsistoy a G. Mehta pays the following expenses: . zg Freight ‘a Insurance me Carriage : H. Singh pays the following expenses: Customs duty 7 Dock dues o Godown rent sn Salary to salesman sn Goods reach the godown of the consignee. At the end of the year 25 transistors remained unsold with H. Singh. The market Value of transistor is 7850. You are required to calculate value of stock lying with H. Singh, Me Solution: STATEMENTS SHOWING VALUE OF STOCK Particulars 2 re Cost of 25 transistors @ %800 per transistor 20 \/4 of Direct Expense (i.e., 25/100) Freight 250.00 Insurance 100,00 Carriage 125.00 Customs Duty 500.00 Dock dues 125.00 Market value of stock is 225 x 850 = %21,250. Cost being less and therefore 25 transistors should be valued at 721,100.00. Consignee’s recurring and non-recurring expenses Consignee’s recurring expenses st *¥ ignored while Consignee’s non-recurring expenses should be taken ino consideration while val closing stock with the consignee. Consignee’s non-recurring expenses are similar to directx? Mlustration 1.5. From the following particulars, calculate the value of unsold goods on: consign t Goods sent on consignment (1500 kgs.) oo Consignor’s expenses ‘ Consignee’s non-recurring expenses ve Consignee’s recurring expenses ‘a Goods sold by consignee (1000 kgs.) Wastage treated as normal (100 kgs.) i (CMA Intermediat® Deevalue of unsold Goods: Unsold quantity = 1 599 _ 1,000 — Cost of Boods sent (3,30,000) 4. G00 ~ 400 kgs expenses (7,000) ~ 3,50 999, Value of unsold goods — on; + ; 'signor’s expenses (13,000) + Consi ion 1.6. Mr. Naitik 3; sends peal 100)1 « 400 = 2 4 consignment basis t0 be sold at spp See ihe value of & 93 £7,50,000 drawn by Naitik for 4 Months on they S88 on 01.9 parker @ 15% p.a. on 04.02.2015, Naiie incurred & ne jose: Nai whereas expenses of Jatin were 750,000 Out of wh; ee by w. galance of & 7,68,750 to Naitik on 31.03.2015 along cy is25% on Sales and 10% of goods remairot if You are required to prepare: (i) Consignment Account and (ji) Jatin’s Account — 00,000. 7,500 at cost to Mr. Jatin on 1.2015. Jatin accepted a bill of tik discounted the bill with his ay of freight and other expenses, 2 fo were non-recurring. Jatin sent the final long with les. The Gross Profit margin 'nsold with Jatin, in the books of Mr. Naitik, (CMA Intermediate, June, 2015) Solution: Books of Mr. Naitik CONSIGNMENT ACCOUNT Date Particulars z Ee Farin —— } “01.01.15 [To Goods Sent on 9,37,500|131.03.15 By Jatin’s Ale 1125,000 Consignment A/c To Cash Ale By Stock on Consignment A/c | —1,04,250 ignment 31.03.15 | To Jatin (Expenses) To Jatin (Commission) | To General P & LA/e L 12,29.250, JATIN’S ACCOUNT Date | __ Particulars z Date Particulars z 3103.15 | To Consignment Ale [11,25,000 |[01.01.13 | By Bill Receivable Ae] 2.50000 31.03.15 | By Consignment Ae 50,000 By Consignment A/c 56,250 6 By Bank A/c (Balance) 7,68,750 y 125,000 11,25,000 —_L ‘Working Notes: 1. Computation of amount of goods sold on consignment: © 9137,500 9 gg - 9:37:500 4.99 = 211,25,000. ~ 1-025" 0.75 . Alternatively: The amount of goods sold on consignment %9,37,500 x 90% = € 8,43,750 <- 8:43,750/0.75 =%11,25,000 2. Computation of commission entitlement:J 2.12 | Special Accounting Problems Commission = 5% of & 11,25,000 = 56,250. 3. Gross profit margin = 25% 4, Hence, cost margin = 75% Hence, cost of goods sold on consignment = € 11,25,000 (Sales) x 750, ' ; = 8,43,750 po However, goods sold are 90% of the total consignment. ost S ; 7 hy 4. Computation of closing stock on consignment eae sent on consignment = 10% of & 9,37,500 = % 93,750 vail fq Naitik’s proportionate expenses = 10% of & 75,000 = % 7,500 . oy Jatin’s proportionate expenses = 10% of & 30,000 (50,000 x 60%) = z 3,009 1 3 1,04,250 ; i wt Note: That only 10% of € 30,000 of Jatin expenses representing his Ron-recurring exp x9 been forming part of the computation of closing stock. ey # Alternatively: 02 § ; Rave Particulars st Goods sent on consignment dc Add: Consignor’s Expenses 7,00 Add: Consignee’s non recurring expenses 0 ca value “+ Closing stock = 10,42,500 » 10% = 1,04,250 sas LOSS OF STOCK In the course of consignment transactions some loss of stock may occur. It ma transit before or after taking delivery of the goods by the consignee or it ma of the consignee. Such loss of stock may be normal or abnormal. Normal characteristics of goods, e.g. loss due to evaj occurs on account of reasons which are only as Abnormal. The examples of such losses ar Normal loss, It is not shown in the consi; sold and closing stock by inflating the rate per unit. The value of closing stock will, therefore that proportion of total value of goods sent which number of units in hand bear to total nunte of units as diminished by loss (i.e., the units actually received by the consignee). In short, cod goods sent becomes cost of goods received. This can be put in the form of the following formula: 'y be in the couse 'Y Occur at the Boda Loss is due to ‘mere poration, sublimation, drying up of B00dS ete. Ifa; accidental or which rarely happen the loss is tema e—theft of goods or destruction of goods by fir, Value of Closing Stock = Total value of good sent x Units of Closing Stock Units actually received by the consignee i Nustration 1.7. consigned 2,000 tonnes of coal @ 250 per tonne to B of Delhi. He paid 220!" as freight. Due to normal wastage only 1 i i as unloading and Cartage calculate the value of closi Solution:0 a —Lonsignment Accounts | 213 650 of 650 tORPES 7.959 * This loss should be deb peor account. Abnormal Loss Accoun: 4 A A int lal Los: Pigs the consignment account With 2 Pe Slosed by tranegeccount and credited to Foe Teste for the management tg idee s Value of Abnon ag i 1 P&L Account © Properly ‘al Loss is given becai oe Y the profitability or otherwise of the Pa up to the date of loss. Proportionate cost ons Will be done on the same Price plus proportionate direct € e valuing abnormal loss, care should be tak # woile © ty such expenses have to be inclu en Of the stay y ded ge where abn ore to that stage. in the valuatio jormal loss took FZ incurred UP U6 ze. This will be clear with the hor euch abnormal loss which ye, 4 consigned to B 100 cases of tea the help of th E ie following tHlust “ cost 2 illustration on 'g could take delivery of only 90 cases Set Per case. He paid 71.000 as freight gm wploading and carriage charges. At the end of the y. Cases were lost in transit. He paid ot 'z1s0 per case- You are required to calculate. (i) i " ne Teported that he has sold away i csi stock Value of abnormal loss and (ii) the wan VALUE OF ABNORMAL Loss cost of 100 cases @ 100 per case Expenses incurred by the Consignor me ‘eal Cost of 100 cases tS Total Cost x Units of Abnormal Loss Total units to be received by the Consignee 211,000 100 ae of Abnormal Loss x10=%1,100 * 10= 1,100 (i) VALUE OF CLOSING STOCK Foal Cost of 100 cases calculated as above: 211,000 z Cost of 10 cases (i.e., units of closing stock) 1,100 ‘Add: Proportionate Expenses incurred by the Consignee 2,000%10 90 luitation 1.9, Calculate the (i) value of abnormal loss and (ii) value of oe ie ae ‘etaa give in Ilustration 1.5, if the abnormal loss of 10 cases happens at the godown °sigee in place of its transit from A to B. mn; " VALUE OF ABNORMAL LOSS ; 10,000 Cost of 100 cases @ 2100 per case S00 Direct Expenses incurred by the Consignor cae Direct Expenses incurred by the Consignee 15,0Ce Consignment Accounts | 2 | 2.23 de in the Books of the Consignee en he gives security -onor’s A/C conn Bank or B/P amount of security given) Dr. cigs are role by Hino ey Wit be made in his Stock Register. ry will be passed except hen he incurs expenses for goods received a record of this fact consignor’s Alc ed on consignment To Bank or Creditor’s A/c mount of expenses incurred) m zs @) jth the 3 @ For sales made or Debtors Ale To Consignor’s Ale Dr the amount of sales) For ‘Commission earned by him Dr. or’s A/c To Commissio e amount of commission) ‘ble to him this will be credited to a special will be debited '© (with th «del-credere ‘commission’ is paya isi Any bad debts ine Consignor’s P & LAC. account ie, del-credere commission account. this account. The balance will be transferred to (6) For stock in hand with the consignee No entry will be passed. ‘ye Itwill not make any difference for the col goods are sent 1° him at cost price oF ive price (i.€.5 4 price higher than cost price)- lhstation 1.17. On the basis of data given in yilustration |- tunesary accounts in the books ‘ofthe Consignee (6) mnsignee whether the mal entries and prepare 10, pass the Jou! 875 ™-