Q.B sold goods on consignment for C, aggregating ₹1,00,000, of which ₹30,000 was on credit. B is entitled to an ordinary commission of 5% and an additional del credere commission of 2%, both calculated on total sales. Later, one credit customer failed to pay ₹5,000 of the amount due. State the total commission B is entitled to, and how the ₹5,000 bad debt should be treated in C's books.

Both commissions are calculated on the full ₹1,00,000 of sales; because del credere commission has been granted, the ₹5,000 bad debt becomes B's own loss, not C's.

Ordinary commission = Total sales × 5% = 1,00,000 × 5% = ₹5,000.

Del credere commission = Total sales × 2% = 1,00,000 × 2% = ₹2,000.

Total commission due to B = 5,000 + 2,000 = ₹7,000.

Del credere commission is paid specifically so that the consignee GUARANTEES collection of amounts due from credit customers. Because B has been granted, and has earned, del credere commission on the full ₹1,00,000 of sales (which includes the ₹30,000 credit sale), B has, in substance, already been compensated for taking on the risk that a credit customer might not pay. When the customer later fails to pay ₹5,000, that shortfall is therefore B's OWN loss to bear — it is never recorded as a bad debt, or as any kind of loss, in C's (the consignor's) books. C's books continue to show the full ₹1,00,000 as sales, and the ₹7,000 commission already paid to B (which included the extra 2% precisely to cover this risk) is the complete and final cost to C of this arrangement. …

A common mistake is still deducting the ₹5,000 bad debt from C's profit even though del credere commission was granted — once del credere commission is agreed and earned, the whole point of the a …