CA CPT Accounts Consignment

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ConsignmentCOPYRIGHT 2013 Parag Sodhani. All Rights Reserved.No part of this Visual Presentation may be reproduced or redistributed, in any form or by any means [graphic, electronic or mechanical, including photocopying, recording, taping or otherwise] or reproduced on any disc, tape, perforated media or other information storage device etc. without prior written permission of the Preparer. Breach of this condition is liable for legal action.

Consignor

Consignee

Mr. Amit remits all sales proceeds to Mr. Vivek, after deducting his expenses and Commission, together with an Account Sales.Mr. Vivek sends his goods to Mr. Amit, together with a Proforma Invoice, to sell such goods

on behalf of & at the Risk of Mr. VivekMr. VivekMr. AmitSale to Buyers

A Statement showing Amount to be Remitted to Consignor, after making deductionsAgent of Mr. VivekPrincipal of Mr. AmitProforma InvoiceQuantityRateetc.

Account Sales

.-...``3Account SalesThis is called CONSIGNMENT

Commission paid to Consignee as reward for his work doneAdditional commission paid to encourage consignee to make credit salesThis is the additional commission paid to consignee,

To promote sales at higher prices than specified, or To encourage consignee to put hard work in introducing a new product.Bad-debts are borne by ConsignorBad-debts are borne by ConsigneeIt is paid as Fixed percentage of Gross SaleUnless otherwise agreed, it is paid on Total Sales [not only Credit Sales]As per Agreement, it is paid on Total Sales, or Difference b/w Actual Sale value & Specified valueOrdinary CommissionDel-credere CommissionOver-riding Commission--Calculation of CommissionTypes of Commission4

500 units, Cost `200 each

4/5th goods for `95,000

Commission= 2% on Sales+ 20% of Gross Sales less All Commission, exceeds Cost price

Commission4% on Sales @ `225 p.u.20% of any Surplus price realised+=

Out of Sales `95,000, Credit sales were `50,000Commission4% on Sales2% Del-credere Comm.+=

500 units, Cost `200 each

5= 2% on Total Sales+ 20% of [Gross Sales All Commissions Cost price]ImpliesCommissionCalculate Commission in Following Cases := 2% * 95,000+ 20% * [95,000 X 80,000]X= 4083.33 = CommissionXCommission4% (225 * 400)20% [95,000(225 * 400)]+=4,600=Commission4% * 95,0002% * 95,000+=5,700=

Consignor

Sale to BuyersMr. VivekConsignors expensesLoading,freight, insurance-in-transit etc.

Consignees exp. (upto goods reach his premises)Unloading,Custom duty, OctroiCarriage inwards,Transportation etc.

Expenses related to salesSelling & Distribution expenses

Non-recurring exp.

ConsigneeMr. Amit

6Expenses while in premisesGodown rentInsurance chargesOffice & admin. etc.

Recurring exp.Here are the variousExpensesincurred at different stages of Consignment

All expenses incurred by consignorCost PriceNet Realizable Value (NRV)

Purchase PriceAll expenses incurred to bring goods to their present location & condition

orWhichever is lesser

Expected Sale Price of Unsold goodsSelling expensesPLUSMINUSExpenses incurred by consignee till goods have finally reached his godowni.e. only Non-recurring expenses of ConsigneeValuation of Consignment StockAt the year-end, any Unsold goods with Consignee, will be treated as Stock of Consignor7

Consignors expenses` 4,000

Consignees expenses Non-recurring`1,000

Consignees expenses Recurring`2,000

500 unitsCost `400 eachParticularsAmt. / Units

Cost of goods Consignors ExpensesConsignees Non-R Exp.Total cost of goods consigned2,00,0004,0001,0002,05,000No. of Units500 uCost per unit`410Value of Stock at Cost [200u]82,000

500 unitsCost `400 each

300 units SoldValuation of Stock at Cost

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In some cases, Consignor prepares Proforma Invoice, at a price more than Cost Price (say, 100+20).Such price is called Invoice PriceConsigning goods above Cost Price has 2 impacts :Goods sent are recorded at Invoice priceUnsold Stock at the end of year, is also valued at Invoice priceTo ascertain True Profit/Loss position, both above should be recorded at Costpassing a Reverse Journal entrytransferring the loading to a Reserve,called Stock ReserveEffect of Loading is Removed byEffect of Loading is removed byConsignment at Above Cost Price9Consignment A/cDr.120To Goods Sent on Consignment120

Goods Sent on ConsignmentDr.20To Consignment20

Closing StockDr.120To Consignment120

Consignment Dr.20To Stock Res.20

Goods costing `80,000Sent at Cost + 25%Invoice Value = ??Goods Costing `1,00,000Sent at 20% profit on Invoice ValueInvoice Value = ??20% of the Goods, whose Invoice value was `15,000, were destroyed.Invoice Value of Goods sent = ??Goods Invoiced at `1,00,000Sent at Cost + 20%Cost = ??` 1,00,000` 1,25,000` 75,000` 83,33310Practice Questions

Goods costing `1,00,000

4/5th goods for `1,10,000

Cost + 25%

Commission4% upto Invoice Value20% of any Surplus above Invoice Value+=

11Calculate Commission in Following Case :



500 unitsCost `400 eachParticularsAmt. / Units

Total cost of goods consigned at I/P[(500*500) + 4000 + 1000]2,55,000No. of Units500 uCost per unit`510Value of Stock at I/P [200u]1,02,000

500 unitsI/P `500 each

300 units soldValue of Stock at Cost [200u]82,000Amount of Stock Reserve20,000Loading on 1 unit (500-400) = `100Loading on Stock of 200 units = `100 * 200 = 20,000 = Stock ReserveValuation of Stock at Invoice Pr.

Amount of Stock Reserve

12Consignees expenses Recurring`2,000

Simpler way to calculate Stock Reserve :

Sale to BuyersLossesAbnormal Loss

Avoidable losses, due to abnormal factors like fire, theft.[Loss-in-transit; Loss in consignees godown]Not treated as part of costValuation just as of Closing StockNormal Loss

Unavoidable losses, due to inherent features of goods e.g. evaporation.

Treated as part of costNo separate valuation is done

Loss-in-TransitLoss at Godown

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1/10th unitsLost in Godown



Consignees expenses Recurring`2,000

500 unitsCost `400 eachParticularsIf Loss is AbnormalIf Loss is Normal

Total cost of goods consigned at I/P[(500*400) + 4000 + 1000]2,05,000This Cost is borne by500 uCost per unit`410


300 unitsSoldValue of Stock [150u]61,500Value of Loss [50u]20,500Valuation of LossValuation of Stock- Loss in Godown2,05,000450 u`455.568,325Normally, it must be treated as Abnormal Loss

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Loss-in-transit 1/10th goods




450 unitsCost `400 eachConsignees expenses Recurring`2,000

300 unitsSoldParticularsLoss is AbnormalLoss is Normal

Consignors exp.4,000Borne byAll 500 uCost p.u. of all units [500]` 408Valuation of LossValuation of Stock- Loss in TransitCost of units2,00,0002,04,000Consignees Non-R exp.1,000Borne byOnly 450 uCost p.u. of good units [450]` 2.2Total cost p.u. for good units410.2Value of Stock [150 Good units]61,530Value of Lost goods [50u * 408]20,4004,000450 u` 453.32,00,0002,04,0001,000450 u` 2.2455.568,325

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16DateParticularsAmt.(`)

DateParticularsAmt.(`)

All Expenses of Consignor[To Cash A/c]Goods sent (At Invoice Value)[To Goods Sent on Consignm. A/c]Sale Proceeds from Consignee[By Consignees A/c]Stock on Consignment (At Inv. Val.)[By Stock A/c]Goods sent (Loading)[By Goods Sent on Consign. A/c]All Expenses of Consignee[To Consignees A/c]Loss on Consignment[By P & L A/c]Bad-debts (IF Consignee is not to bear Risk of Bad-debts)[To Consignees A/c]Consignment A/cCommission[To Consignees A/c]Profit on Consignment[To P & L A/c]Stock on Consignment (Loading)[To Stock Reserve A/c]Following is the Consignment Account which helps to Learn Journal Entries of Consignment, and Calculate Profit/Loss on Consignment

Account Sales

Actual Salesxx(-) All Expenses incurred by Consigneexx(-) Bad-debts (if no del-credere commission)xx(-) Commission due to himxx(-) Advance already given to consignorxxAmount to be remittedxx

17Following is the Account Sales which helps to Calculate the amount to be remitted by Consignee to Consignor

18For any suggestions or comments, write up to

[email protected]

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CA CPT Accounts Consignment