E T B I C MBA AGU I

Question of Consignment Accounts.

Q. Ali consigned 100 cases of candles to Khalid costing Rs.50 per case. He incurred expenses -packing – Rs.100, carriage - Rs.150 and rail freight - Rs.200. Some cases were damaged in transit and consignee took delivery of 90 cases. Consignee spent Rs.50 for cartage and Rs.300 towards warehouse rent. Khalid sold 70 cases at Rs.60 per case. He sent net amount payable to consignor after deducting his expenses and commission at the rate of 5% of sale. Consignor received Rs. 300 from railway for damages. Show Consignment Account and Consignee A/c in the book of consignor.

asked Jan 19, 2015 in Consignments by aslam (107 points) 922 views

1 Answer

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In case of any doubt, please don't hesitate to discuss further.

answered Jan 19, 2015 by jbsclasses (3,967 points)
Please let me know whether the goods were sold @ Rs.120/unit or Rs.1200/unit.  My reason for asking this is because the cost price is Rs.1000/unit.
Yes Sir, It is Rs. 1200/Unit

Damaged goods are sold for Rs.12,000 and they cost you Rs.12,000 including repairing expenses.  Since there is no loss, you would not get any claim from the Insurance Company.  Even in such a case we have to take out the expenses and income relating to damaged goods out of Consignment A/c because we don’t want to vitiate the profitability of that particular consignment.  The journal entry for this will be:

 

1.  Abnormal Loss A/c         Dr.  10,000

        To Consignment A/c                             10,000

 

2.  Abnormal Loss A/c         Dr,    2,000

        To Cash A/c                                            2,000

 

3.  Cash A/c                          Dr.  12,000

        To Abnormal Loss A/c                          12,000

It means if goods get partially damaged then all the expense related to damaged goods is charged to Abnormal Loss A/c. such as repair expenses, commision etc. and any sale made, insurance co. amount received  is credited to abnormal loss A/c. & the balance will be trnsfd. to P& L A/c.

These expenses or sales will be not be debited or credited to Consignment A/c, Only abnormal Loss amount will be credited to consignment A/c.
You are absolutely right.
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