Question

A of Surat consigns goods to B of Jaipur to be sold at or above invoice price. B is entitled to get a commission of 8% on sales at invoice price plus 25% of any surplus price realised. B accepted a bill of exchange drawn by A amounting to 50% of the invoice price as security. In the year 2010 goods consigned by A were invoiced at 2,50,000. These cost to A *2,00,000 (including freight). Sales made by B during the year amounted to ₹ 2.35,000. AL the end of the year goods unsold with B represented an invoice value of 60.000. During the year, A had received from B Rs 40000 by bank draft , certain remittance being in transit on 31 March 2011 . prepare necessary ledger accounting in book of both the parties also show how the consignment stock will appear in balance sheet

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Answer 1

The question involves creating ledger accounts for a consignment arrangement between A (consignor) and B (consignee), and detailing how unsold consignment stock is shown on the balance sheet.

Step-by-step explanation:

The scenario describes a consignment arrangement where A from Surat consigns goods to B in Jaipur. The goods are to be sold at or above a specified invoice price, with B earning a commission on sales. We're tasked with preparing the necessary ledger accounts for both A and B, as well as showing how the consignment stock will appear in the balance sheet.

Accounting for A (Consignor)

Consignment to Jaipur Account (to record goods sent on consignment at invoice price)

Bank Account (to record cash received)

Consignee (B) Account (to record the acceptance of the bill of exchange and remittance in transit)

Accounting for B (Consignee)

Sales Account (to record sales made)

Commission Income Account (to calculate and record commission earned)

Bank Account (to record cash sent to A)

In the balance sheet, the consignment stock will appear under the header of 'Current Assets' as 'Stock on Consignment' at the invoice value of unsold goods of Rs 60,000. If any advance has been given, it will appear on the liabilities side as a 'Consignee's (B’s) Account' until it is adjusted against sales or settlement with the consignor.