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Accounting for Special Transactions - Consignment (Old Syllabus) Notes

Q1. Consignment sale and Normal sale.

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Q2. Commission and Discount.

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X of Delhi purchased 10,000 metres of cloth for Rs.2,00,000 of which 5,000 metres were sent on consignment to Y of Agra at the selling price of Rs.30 per metre. X paid Rs.5,000 for freight and Rs.500 for packing etc. Y sold 4,000 metre at Rs.40 per metre and incurred Rs.2,000 for selling expenses. Y is entitled to a commission of 5% on total sales proceeds plus a further 20% on any surplus price realised over Rs.30 per metre. 3,000 metres were sold at Delhi at Rs.30 per metre less Rs.3,000 for expenses and commission. Owing to fall in market price, the inventories of cloth in hand is to be reduced by 10%. Prepare the Consignment Account and Trading and Profit & Loss Account in books of X.

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D of Delhi appointed A of Agra as its selling agent on the following terms:

Goods to be sold at invoice price or over.

A to be entitled to a commission of 7.5% on the invoice price and 20% of any surplus price realized over invoice price

The principals to draw on the agent a 30 days bill for 80% of the invoice price.

On 1st February, 2016, 1,000 cycles were consigned to A, each cycle costing Rs.640 including freight and invoiced at Rs.800.

Before 31st March, 2016, (when the principal’s books are closed) A met his acceptance on the due date; sold off 820 cycles at an average price of Rs930 per cycle, the sale expenses being Rs.12,500; and remitted the amount due by means of Bank draft.

Twenty of the unsold cycles were shop-spoiled and were to be valued at a depreciation of 50% of cost.

Show by means of ledger accounts how these transactions would be recorded in the books of A and find out the value of closing inventory with A to be recorded in the books of D at cost.

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Mr. Y consigned 800 packets of toothpaste, each packet containing 100 toothpastes. Cost price of each packet was Rs.900. Mr. Y Spent Rs.100 per packet as cartage, freight, insurance and forwarding charges. One packet was lost on the way and Mr. Y lodged claim with the insurance company and could get Rs.570 as claim on average basis. Consignee took delivery of the rest of the packets and spent Rs.39,950 as other
non-recurring expenses and Rs.22,500 as recurring expenses. He sold 740 packets at the rate of Rs.12 per toothpaste. He was entitled to 2% commission on sales plus 1% del-credere commission. You are required to prepare Consignment Account. Calculate the cost of inventories at the end, abnormal loss and profit or loss on consignment.

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