Using the same facts as above — Rama Rao of Hyderabad consigned 1,000 units at Rs 50 each to Suresh of Vijayawada, paying Rs 2,500 as freight and insurance; 50 units were destroyed in transit as an abnormal loss valued at Rs 2,625, of which Rs 2,000 was recovered as an insurance

Question

Using the same facts as above — Rama Rao of Hyderabad consigned 1,000 units at Rs 50 each to Suresh of Vijayawada, paying Rs 2,500 as freight and insurance; 50 units were destroyed in transit as an abnormal loss valued at Rs 2,625, of which Rs 2,000 was recovered as an insurance claim and Rs 625 written off to Profit and Loss Account. Of the 950 units actually received by Suresh, he sold 800 units at Rs 80 per unit (all on credit), paid Rs 950 as non-recurring clearing charges and Rs 500 as recurring godown rent, and is entitled to an ordinary commission of 5% plus a del credere commission of 2% on total sales. One of Suresh's credit customers, who had bought goods worth Rs 4,000, later failed to pay. Prepare the Consignment Account, the Consignee's (Suresh's) Account, and pass the journal entries in the books of Rama Rao, including the amount finally remitted by Suresh.

Accepted Answer

**Step 1 — Quantity and value reconciliation.** Of the 1,000 units consigned, 50 were lost in transit (already dealt with as an abnormal loss of Rs 2,625, adjusted against a Rs 2,000 insurance claim and a Rs 625 charge to Profit and Loss Account in the earlier illustration). Suresh actually received 950 units, of which he sold 800, leaving 150 units unsold.

**Step 2 — Value of closing stock (150 units).** The remaining consignor's expense attributable to the 950 units received is Rs 2,500 - Rs 125 (already charged to the lost 50 units) = Rs 2,375. Suresh's own clearing charges of Rs 950 (non-recurring, direct) also apply to the full 950 units; his godown rent of Rs 500 is recurring and excluded.

| Item (for 950 units) | Amount (Rs) |
|---|---|
| Cost (950 x Rs 50) | 47,500 |
| Add: Consignor's remaining expense | 2,375 |
| Add: Consignee's clearing charges | 950 |
| Total | 50,825 |

Cost per unit = Rs 50,825 / 950 = Rs 53.50. Value of 150 unsold units = 150 x Rs 53.50 = **Rs 8,025**.

**Step 3 — Sales and commission.** Sales = 800 units x Rs 80 = Rs 64,000. Commission = (5% + 2%) x Rs 64,000 = 7% x Rs 64,000 = **Rs 4,480**. Because Suresh is entitled to del credere commission, the Rs 4,000 owed by the defaulting customer is Suresh's own loss to bear — it does not reduce the sales figure of Rs 64,000 recorded in Rama Rao's books, and no bad debt entry is passed by Rama Rao at all.

**Step 4 — Consignment Account (in Rama Rao's books).**

| Consignment to Vijayawada A/c | Rs | | Rs |
|---|---|---|---|
| To Goods Sent on Consignment A/c | 50,000 | By Abnormal Loss A/c | 2,625 |
| To Bank A/c (consignor's freight/insurance) | 2,500 | By Suresh's A/c (Sales) | 64,000 |
| To Suresh's A/c (his expenses: 950 + 500) | 1,450 | By Consignment Stock A/c | 8,025 |
| To Suresh's A/c (Commission) | 4,480 | | |
| To Profit and Loss A/c (profit, balancing figure) | 16,220 | | |
| **Total** | **74,650** | **Total** | **74,650** |

**Step 5 — Consignee's (Suresh's) Account (in Rama

Suresh's A/c	Rs		Rs
To Consignment A/c (Sales)	64,000	By Consignment A/c (Expenses)	1,450
		By Consignment A/c (Commission)	4,480
		By Bank A/c (amount remitted, balancing figure)	58,070
Total	64,000	Total	64,000

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Goods sent on consignment	50,000	By Shivaji (Sales)	48,000
To Bank (consignor's expenses)	2,400	By Consignment Stock c/d	13,100
To Shivaji (consignee's expenses)	1,200
To Shivaji (commission 5% of 48,000)	2,400
To Profit transferred to P and L A/c	5,100
	61,100		61,100

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Goods Sent on Consignment A/c	3,00,000	By Prasad A/c (Gross Sales)	4,50,000
To Bank A/c (freight and insurance)	12,000
To Prasad A/c (unloading and godown rent)	10,000
To Prasad A/c (commission 5% of 4,50,000)	22,500
To Profit transferred to Profit and Loss A/c	1,05,500
Total	4,50,000	Total	4,50,000

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Consignment A/c (Gross Sales)	4,50,000	By Bills Receivable A/c (bill accepted)	1,00,000
		By Consignment A/c (unloading and godown rent)	10,000

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Goods Sent on Consignment A/c	60,000	By Karan's A/c (Sales)	50,000
To Bank A/c (Ravi's expenses)	4,000	By Stock on Consignment A/c (c/d)	32,000
To Karan's A/c (expenses)	3,000
To Karan's A/c (commission 6% of 50,000)	3,000
To Profit transferred to P&L A/c	12,000
Total	82,000	Total	82,000

Concept understanding — Consignment Account and Related Ledger Accounts in the Consignor's Books

Working — Valuation of unsold stock

Consignment to Karimnagar Account

Karan's Account (Consignee)

Item (for 950 units)	Amount (Rs)
Cost (950 x Rs 50)	47,500
Add: Consignor's remaining expense	2,375
Add: Consignee's clearing charges	950
Total	50,825

Consignment to Vijayawada A/c	Rs		Rs
To Goods Sent on Consignment A/c	50,000	By Abnormal Loss A/c	2,625
To Bank A/c (consignor's freight/insurance)	2,500	By Suresh's A/c (Sales)	64,000
To Suresh's A/c (his expenses: 950 + 500)	1,450	By Consignment Stock A/c	8,025
To Suresh's A/c (Commission)	4,480
To Profit and Loss A/c (profit, balancing figure)	16,220
Total	74,650	Total	74,650

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Goods Sent on Consignment A/c	20,000	By Arjun A/c (Sales)	30,000
To Cash A/c (freight 800 + insurance 700)	1,500
To Arjun A/c (sales expenses)	750
To Arjun A/c (commission 5% of 30,000)	1,500
To Profit transferred to Profit and Loss A/c	6,250
Total	30,000	Total	30,000

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Goods sent on consignment	10,000	By Mehta and Co. (Sales)	18,500
To Bank (consignor's expenses)	500
To Mehta and Co. (carriage 600 + other 400)	1,000
To Mehta and Co. (commission 5% of 18,500)	925
To Profit transferred to P and L A/c	6,075
	18,500		18,500

Dr — Particulars	Amount (₹)	Cr — Particulars	Amount (₹)
To Goods Sent on Consignment (100 x 600)	60,000	By Nikhil (Sales 80 x 800)	64,000
To Bank (Insurance 1,000 + Freight 1,000)	2,000	By Consignment Stock c/d	12,400
To Nikhil (Selling Exp. 500 + Commission 6,400)	6,900
To Profit transferred to P&L A/c	7,500
Total	76,400	Total	76,400

Particulars	Amount (₹)	Particulars	Amount (₹)
To Goods sent on consignment	30,000	By Jahnavi — Sales	22,000
To Bank — cartage & other expenses	2,000	By Consignment Stock c/d	16,000
To Jahnavi — expenses	1,200
To Jahnavi — commission (5% of 22,000)	1,100
To Profit on consignment (to P&L A/c)	3,700
Total	38,000	Total	38,000

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Goods sent on consignment (200 × 400)	80,000	By Rama Brothers — Sales (100 × 520)	52,000
To Cash — Freight & Insurance	5,000	By Consignment Stock A/c	42,500
To Rama Brothers — Expenses (2,400 + 1,300)	3,700
To Rama Brothers — Commission (10% of 52,000)	5,200
To Profit transferred to P&L A/c	600
Total	94,500	Total	94,500

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Consignment A/c	42,500	By Balance c/d	42,500
Total	42,500	Total	42,500

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Consignment A/c (sales)	52,000	By Bills Receivable (bill accepted)	50,000
To Balance c/d (due to Rama Brothers)	6,900	By Consignment A/c (expenses)	3,700
		By Consignment A/c (commission)	5,200
Total	58,900	Total	58,900
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