INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

2 CONSIGNMENT ACCOUNTING

2009 - Dec [3] (a) Shyam consigned 2,00,000 units @ ` 5/- each to Mr.
Ram, and paid Freight and Insurance amounting to `1,00,000. Ram spent
further the following amounts:
`
(i) Insurance 5,000
(ii) Godown Rent 4,000
(iii) Clearing 6,000
2,000 units were damaged during transit due to heavy rains.
Ram sold 1,00,000 units @ ` 10/-per unit.
Ram realised salvage value of damaged units ` 2,000/-
Ram is to get a commission @ 5% on sales.
Determine the abnormal loss. (4 marks) [CMAF]
Answer :
Abnormal Loss = ` 11,00,000 × 2,000 Units/2,00,000 units `11,000
Less 2,000
Abnormal Loss 9,000
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2010 - Dec [4] Answer the following:

(d) Himanshu Gupta sent out goods costing ` 80,000 to Navin Joshi as to
show 20% profit on invoice price. 40'% goods were lost in transit. 60%
of the goods received were sold half at invoice price and the balance at
20% above the invoice price. Rate of Commission is 10% on sales at
invoice price plus 50% of gross sales less all commission exceeds sales
at invoice price. Calculate the amount of commission.
(2.5 marks)[CMAF]
Answer :
A. Invoice Price of Goods sent (80,000 + 20% on IP) 1,00,000
B. Less : Invoice Price of Goods lost (1,00,000 × 40%) 40,000
C. Invoice Price of Balance Goods (A-B) 60,000
D. Invoice Price of Goods sold (60% of 60,000) 36,000
E. 50% Sales at Invoice Price (50% of 36,000) 18,000
F. 50% Sales at 25% above Invoice Price (50% of 36,000) × 125% 22,500
G. Total Sales Proceeds (E + F) 40,500
H. 10% Commission on Sales at Invoice price (10% of 36,000) 3,600
INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

Let Total Commission be = X

X - ` 3,600 = 50% (40,500 - X - 36,000)
= 20,250 - 0.5X - 18,000
X = 5,850/1.5 = ` 3,900
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2011 - Dec [4] (c) Goods sent to consignee costing ` 4,50,000. Consignor's
expenses were ` 30,000. 1/5th of the goods were broken in transit and it was
treated as normal loss. 4/5th of the remaining goods were sold by consignee.
Calculate the value of consignment stock. (2 marks)[CMAF]
Answer :
Cost of goods sent on consignment = ` 4,50,000
Consignor’s expenses = ` 30,000
Total Cost = ` 4,80,000
Goods less normal loss =

Stock sold on consignment = of =

Value of Closing stock on consignment = of 4/5

= × 4,80,000
= ` 76,800
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2012 - June [2] (c) Goods costing ` 6,30,000 were sent out to consignee at
a profit of 20 percent on invoice price. Consignee sold 2/3rd goods for
` 6,00,000. Consignee was entitled to an ordinary commission of 3 percent
on sales at invoice price and over-riding commission of 20 percent of any
surplus realized.
Calculate the amount of consignee’s commission and give the journal
entry for it in the books of the consignor. (4 marks)[CMAF]
INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

Answer :
Invoice value of goods sold = 6,30,000 x x = `5,25,000

Surplus of Sale value over invoice value = 6,00,000 - 5,25,000 = ` 75,000

Consignee Commission: `
Ordinary ` 5,25,000 x = 15,750

Over-riding ` 75,000 x = 15,000

Total Commission = 30,750

In the Books of the Consignor
Consignee Commission:
Consignment A/c Dr. 30,750
To Consignee’s A/c 30,750
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2013 - Dec [1] {C} Answer the following question (give workings wherever
required):
(ix) From the following particulars, calculate the value of unsold goods on
consignment: `
Goods sent on consignment (1500 kgs.) 3,30,000
Consignor’s expenses 13,000
Consignee’s non-recurring expenses 7,000
Consignee’s recurring expenses 3,500
Goods sold by consignee (1000 kgs.) 3,50,000
Wastage treated as normal (100 kgs.) —
(2 marks)
Answer:
Value of unsold Goods:
Unsold quantity = 1,500 -1,000 - 100 = 400 Kgs.
Cost of goods sent (3,30,000) + Consignor’s Exp. (13,000) + Consignee’s
non-recurring exp. (7,000) = 3,50,000.
Value of unsold goods = [3,50,000 / (1,500 - 100)] x 400 = ` 1,00,000.
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INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

2014 - June [8] (a) On 1st July, 2013 B. Dutta of Kolkata consigned 250
Computers costing ` 28,000 each to T. Ramasami, Chennai. Expenses of
` 17,000 were met by the consignor. T. Ramasami spent ` 14,500 for
clearance on 31st July, 2013 and selling expenses were ` 1,500 per
computer as and when the sale made by consignee. T. Ramasami sold on
4th September, 2013, 150 computers at `40,000 per computer and again on
21st September, 75 computers at ` 42,500.
Mr. Ramasami was entitled to a commission of ` 1,500 per computer sold
plus one-fourth of the amount by which the gross sale proceeds less total
commission there on exceeded a sum calculated at the rate of ` 35,000 per
computer sold. T. Ramasami sent the account sale and the amount due to
B. Dutta on 30th September, 2013 by bank demand draft.
You are required to show the consignment account and T. Ramasami’s
account in the books of B. Dutta. (8 marks)
Answer:
Books of B. Dutta of Kolkata
Consignment to Chennai Account
Date Particulars Amount Date Particulars Amount
(`) (`)

01.07.13 To Goods Sent on Consignment A/c 70,00,000 04.09.12 By T. Ramasami (Sales) 60,00,000

01.07.13 To Bank A/c (Exp.) 17,000 21.09.13 By T. Ramasami (Sales) 31,87,500

31.07.13 To T. Ramasami (Clearance Exp.) 14,500 30.09.13 By Stock on Consignment A/c 7,03,150

04.09.13 To T. Ramasami (Selling Exp.) 2,25,000

21.09.13 To T. Ramasami (Selling Exp.) 1,12,500

30.09.13 To T. Ramasami (Commission) 5,32,500

30.09.13 To Profit & Loss A/c 19,89,150

98,90,650 98,90,650
INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

Dr. T. Ramasami Chennai A/c

Cr.
Date Particulars Amount Date Particulars Amount
(`) (`)
04.09.13 To Consignment A/c 60,00,000 31.07.13 By Consignment A/c 14,500
21.09.13 To Consignment A/c 31,87,500 (Clearance Exp.)
04.09.13 By Consignment A/c 2,25,000
(Selling Exp.)
21.09.13 By Consignment A/c 1,12,500
(Selling Exp.)
30.09.13 By Consignment A/c 5,32,500*
(Commission)
30.09.13 By Bank A/c 83,03,000
91,87,500 91,87,500
Working Notes:
(i) Calculation of Commission
Let ‘x’ be total commission
x = (225 × 1,500) + [60,00,000 + 31,87,500 - x - 1 (35,000 × 225)]

x = 3,37,500 + (91,87,500 - x - 78,75,000)

x = 3,37,500 + 3,28,125 -

× = 6,65,625

x = 5,32,500*
(ii) Valuation of stock on consignment
Particulars Amount `
Valuation of stock on consignment:
250 - 150 - 75 = 25 computers @ ` 28,000 7,00,000
Add: Consignor’s Expenses = 17,000 ×
1,700
Add: Share of Consignee’s Clearing Exp. 14,500 ×
1,450
Value of unsold stock 7,03,150
Space to write important points for revision
INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

2014 - Dec [1] Answer the following questions (Give workings):

(e) Ajay of Jaipur sent goods of ` 2,50,000 to Vijay of Mumbai on
consignment. Ajay paid ` 8,500 as railway freight and ` 4,240 as
insurance. 2% goods are damaged in the Vijay’s godown due to normal
circumstances. Vijay incurred cartage ` 5,140 and selling expenses
` 14,700. Calculate the value of stock of unsold 15% of goods sent to
Vijay.
(h) ` 3,25,000 is total cost of 6500 units, consignor’s expenses are ` 65,000,
units lost in transit was 700 units and consignee’s non-recurring
expenses amounted to ` 4,300, what will be the value of stock?
(2 marks each)
Answer:
(e)
Closing Stock = 2,50,000 @ 15% = 37,500
Cost of goods sent = 2,50,000
Freight paid by Ajay = 8,500
Insurance paid by Ajay = 4,240
Cartage paid by Vijay = 5,140
2,67,880
2% is Normal loss, hence cost of goods sent = 2,45,000
Closing Stock =
= 41,002
Answer:
(h) Cost of 6500 units = Total cost + Consigner expenses
= 3,25,000 + 65,000 = ` 3,90,000
Cost of 700 units = (` 3,90,000 ÷ 6,500) × 700 = ` 42,000
Value of closing stock = 6500 unit cost price – Cost of units lost in transit
= ` 3,90,000 – ` 42,000 = ` 3,48,000
Add: Non-recurring expenses =` 4,300
Total cost price of 5800 units = ` 3,52,300

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INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

2015 - June [6] Answer the question:

(c) MR NAITIK sends goods to the value of ` 9,37,500 at cost to MR JATIN
on consignment basis to be sold at 5% commission on sales on
01.01.2015. Jatin accepted a bill of ` 2,50,000 drawn by Naitik for 4
months on the same date. Naitik discounted the bill with his banker @
15% p.a. on 04.02.2015. Naitik incurred ` 75,000 by way of freight and
other expenses, whereas expenses of Jatin were ` 50,000 out of which
60% were non-recurring. Jatin sent the final balance of ` 7,68,750 to
Naitik on 31.03.15 along with account sales. The Gross Profit margin is
25% on Sales and 10% of Goods Remained unsold with Jatin.
You are required to prepare:
(i) Consignment Account and
(ii) Jatin Account-in the books of Mr. Naitik. (8 marks)
Answer:
In the books of Naitik
Dr. Consignment A/c Cr.
Date Particulars ` Date Particulars `

01.01.15 To Goods Sent on 9,37,500 31.03.15 By Jatin's A/c 11,25,000

Consignment A/c By Stock on
To Cash A/c 75,000 Consignment A/c 1,04,250
31.03.15 To Jatin A/c (Exp.) 50,000
To Jatin A/c (Comm.) 56,250
To General P&L A/c 1,10,500

12,29,250 12,29,250
Dr. Jatin’s A/c Cr.
Date Particulars ` Date Particulars `

31.03.15 To Consignment A/c 11,25,000 01.01.15 By Bill receivable A/c 2,50,000

31.03.15 By Consignment A/c 50,000

By Consignment A/c 56,250

By Bank A/c 7,68,750

(Balance)

11,25,000 11,25,000
INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

Working Notes:
1. Calculation of amount of goods sold on consignment:
× 0.90 = ` 11,25,000
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2016 - June [4] (a) IRANI & Co., of Chennai had consigned 6000 shirts to
Vikram of Jaipur at cost of ` 425 each. Irani & Co., paid freight ` 50,000 and
insurance ` 7,500. During the transit 550 shirts were totally damaged by fire.
Vikram took delivery of the remaining shirts and paid ` 82,000 on custom
duty. Vikram had sent a bank draft to Irani & Co., for ` 3,50,000 as advance
payment. 5000 shirts were sold by him at ` 550 each. Expenses incurred by
Vikram on godown rent and advertisement, etc., amounted to ` 12,000. He
is entitled to a commission of 5%. One of the customer to whom the goods
were sold on credit could not pay the value of 40 shirts which is not
recoverable. Vikram settled his account immediately. Nothing was recovered
from the insurer for the damaged goods.
You are required to prepare:
(i) Consignment to Vikram Account.
(ii) Vikram Account – in the book of IRANI & Co. ((4 + 1) + 2 = 7 marks)
Answer :
(i) In the books of Irani & Co.
Consignment to Vikram A/c
Particulars Amount Particulars Amount
To Goods sent on consignment A/c 25,50,000 By Vikram A/c (Sales) 27,50,000
To Bank (freight & insurance) 57,500 (5,000 x 550)
To Vikram’s A/c: By Abnormal loss A/c 2,39,021
Customs duty 82,000 (W -1)
Godown rent Adv. etc. 12,000 By Stock on Consignment 2,02,333
Commission (W -2)
(5,000 x 550 x 5%) 1,37,500 2,31,500
INSPIRE ACADEMY 8888888 1719 CA CS SHREE SIR

Debtors A/c (bad debts) 22,000

Profit on Consignment 3,30,354

31,91,354 31,91,354

(ii) Vikram’s A/c

To Consignment A/c 27,50,000 By Bank A/c 3,50,000
By Consignment A/c 2,53,500
(2,31,500+22,000)
By Bank A/c 21,46,500
27,50,000 27,50,000
Working Note:
1. Abnormal loss: = ` 2,39,021

2. Valuation of Unsold Stock:

`
Cost Value (450 x 425) 1,91,250.00
Freight & Insurance (57,500/6,000 x 450) 4,312.50
Add: Non- recurring ex. of consignee 6,770.64
Customs (82,000/ 5,450 x 450) 2,02,333.14
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