CONSIGNMENT CONTINUATION
Deficiency of stock : The consignee may discover some deficiency in stock on his actual physical stock on his actual physical stock taking. The value of loss arising out of such deficiency will be calculated in the same way as the value of unsold stock. This will be brought into account by debiting stock Deficiency Account and crediting Consignment Account.Stock Deficiency Account will be closed by transfer to the debit of consignment Account or preferably of profit & Loss Account,.If, however,there is an arrangement that any deficiency of stock will be made good by the consignee,the Deficiency Account will be closed by transfer to the debit of the consignee’s Personal Account.
Problem : Goods sent on consignment 200 units @` 150 per unit.Expenses paid by the consignor :Freight `600,Insurance `400.Expenses paid by the consignee:Unloading `200 selling expenses `100.The consignee sold 170 units and informed a deficiency of 3 units disclosed by his actual physical stock taking.
Show journal entries in the books of consignor relating to unsold consignment stock and the deficience.
the real profit earned on consignment,the consignor sends proforma invoice to the consignee at selling price or at a fixed percentage added to cost price.Goods sent on consignment may be entered in the books at such inflated invoice price.The value of any abnormal loss and stock on consignment will be calculated on the basis of inflated price.Hence,in order to ascertain the true profit or loss on a consignment it will be necessary to eliminate the load and bring down the items to cost level.For this purpose the following adjusting entries will be made :
1.For load on goods sent on consignment
Dr. Goods sent on Consignment A/c
Cr.consignment A/c
2.For load included in the value of abnormal loss
Dr. Consignment A/c
Cr. Abnormal Loss A/c
3.For load included in the value of stock on consignment
Dr. Consignment A/c
Cr. Stock Reserve A/c
Note : Abnormal loss may be also be valued on the basis of cost.In such a case adjustment entry No.2 will not be required.
The balance of Goods sent on consignment Account will be transferred to the Trading Account or purchases Account.The balance of stock on Consignment Account and stock Reserve Account will be carried forward to the next year for being transferred to the consignment Account,the former on the debit side and the latter on the credit side.In the Balance Sheet,Stock Reserve Account will be shown as a deduction from stock on consignment on the asset side.
No special treatment is necessary in the books of the consignee when goods are invoice at a price higher than cost.
Problem : On 1st july,1991,Radio House of Bombay consigned 100 radio sets to Banerjee Bros.of Calcutta.The cost of each radio set was `.450 but the pro forma invoice price was `600.Radio House paid `3,000 for freight and insurance. On 7th july,1991,Banerjee Bros,eccepted a 3 months’ bill drown upon them by Radio House for `.30,000.Banerjee Bros.Paid `.1,200 as rent and ` 750 for advertisement and up to 31st December,1991(on which Radio House close their books)they sold 80 radio sets at `.615 each.Banerjee Bros.were entitled to a commission of 5 per cent on sales.
Show journal entries recording the above transactions in the books of Radio House and Banerjee Bros. Show also the Ledger Accounts in the books of Radio House.
Problem : Amlankusum of culcutta consigned on 1.1.92 goods at invoice value of ` 12,500 which was made up by adding 25% on cost,to manasmukul of Arunachal.Amlankusum paid `.300 as freight and `200 as insurance on these goods.
On 30.6.92 Amlankusum received a remmitance of `.7,000 with an Account Sales from Manasmukul showing that he had –
(i) Sold 3/5 of Goods for ` 9,000
(2) Paid `.150 as landing charges and `250 as selling expenses.
(3) Retained his commission of 10% on gross sales.you are required to write up-
(a) The consignment to Arunachal A/c,and
(b) Manasmukul’s personal A/c
As they would appear in the books of Amlankusum for the period ended 30.6.92 which ic the end of his accounting year.
Problem : Nanak of Calcutta consigned 100 prestige cookers to Rajat of Jalpaiguri costing `.90 per cooker,but invoiced at a price so as to show 20% profit on such invoice price.Nanak spent `.800 as freight and insurance.Rajat was entitled to a commission of 10% on gross sales.
Rajat sold 75 cookers@ `.150 each and spent `.150 as dock dues and `.200 as miscellaneous expenses.
Show Consignment A/c and consignee’s A/c in the books of consignor.
