Q.1. Define Consignment.
Ans. A consignment may be defined as an act of sending or shipment of goods by a
trader or manufacturer to’his agent at some other place for the purpose of sale at his own risk.
Q.2. How many parties are involved in consignment? Ans. There are two parties in consignment.
I. Consignor ii. Constgnee
Q.3. Who is the consignor?
Ans. The sender of the goods (generally manufacturer or trader) is known as consignor.
Q.4. Who is the consignee?
Ans. The person to whom the goods aredespatched or sent for the purpose of
sale (i.e. the agent) is called the consignee.
Q.5. Differentiate between consignment and sales.
Ans. In case of sale. ownership of the goods immediately transferred from the
seller to the buyer as soon as the goods are sold but in case of consignment the ownership
does not pass on to the consignee who is merely an agent.
Q.6. What is consignment account?
Ans. A separate consignment account is opened for each consignment which
shows the profit earned or loss sustained on a particular consignment. In fact it is a
combination of trading and profit and loss Account of a given consignment.
Q.7. What is outwards consignment?
Ans.. When the goods are sent by the consignor to the consignee, it will be a
consignment outward from consignor point of view. •
Q.8. What is inwards consignment?
Ans. When the goods are sent by the consignor to the consignee it will be
consignment inward from consignee point of view.
Q.9. What is the relationship between the consignor and the consignee? Ans. The relationship between the consignor and the consignee is that of
principle and agent. i.e. the consignor is principle whereas the consignee is an agent.
Q.10. What is commission?
Ans. It is remuneration which is-paid the consignor to the consignee for selling
the goods. The commission is usually paid by at certain percentage on the gross proceeds of sale.
Short Answer Questions 803
. Q.11. What is Del-credere commission?
Ans.. It is an additional or extra commission which is allowed from the consignor to the consignee for which consignee is made responsible for bad debts is known a delcredre commission ordinary commission does not make the consignee responsible for bad debts and losses. If the consignor, desirous to make the consignee responsible for bad debts he is generally given additional commission on that sales.
Q.12. What is overriding commission?
Ans. Commission paid to the consignee by the consignor for pushing the new product in the market is called overriding commission. It is generally granted by the consignor to his agent to work hard in a new line of product.
Q.13.What is advance against consignment?
Ans. Generally the consignor receives from the consignee advance in the shape. of bills receivable or cash. This is the guarantee by the consignee what when sales are effected, he will make the necessary payment.. When the good’s are sold his advance is generally adjusted against the payment made by consignee.
Q.14. What is per-forma invoice?
Ans. It is a. statement supplied by the consignor to the consignee containing particulars as to the quantity, quality, value and charges upon the goods consigned.
Q.15. What is an account sales?
Ans. It is a statement which is sent by the consignee to the consignor
•
periodically detailing there in the total sale made and the price realized, expenses incurred, commission earned and the net amount due to the consignor.
Q.16. What is the difference between account sale and sale account?
Ans.. A document containing all the information about the sale of goods’, expenses incurred by the consignee and commission due to him is called account sale. But sales account provides information about goods sold, consignee’s expenses incurred
in connection with the sale of goods.
Q.17. What do you mean by the unsold stock in consignment?
• Ans. The goods left unsold with the consignee at the end of the certain period is called unsold stock on consignment.
Q.18. How the unsold stock is valued?
•
Ans. Unsold stock must be valued at cost price plus the relevant portion of the expenses already incurred by the consignor and the consignee. But one should take into account only those expenses at the consignee’s end which are incurred till the goods reach to the consignee’s godown in other words only the direct expenses of the
consignee.
Q.19. What are the direct expenses?
Ans. Direct expenses are those expenses which are incurred on the goods till those reach the godown of the consignee. These expenses are of non-recurring in nature. At the time of valuation of unsold stock. Such expenses from a part of the cost of stock.
Q.20. What are the indirect expenses?
Ans. Indirect expenses are the expenses which are incurred after the goods reach consignor’s godown. These expenses are of recurring in nature. At the time of valuation of unsold stock. Such expenses do not form the part of the cost of stock.
Q.21. Give the examples of indirect expenses.
Ans. Indirect expenses includes Storage charges, Godown rent, Petty expenses, repair charges, Insurance during storage, Carriage to buyer’s warehouse, Commission expenses on goods, Buying commission, Selling commission etc.
Q.22. What are the losses on Consignment?
Ans. There are always chances of losses on the goods consigned to the consignee, so the losses may be classified as under:
i) Normal losses ii) Abnormal losses
Q.23. What are Normal losses?
Ans. Normal losses mean inherent and unavoidable losses. Normal losses arise due to natural causes such as evaporation, drying, breakage in bulk etc.
Value of closing stock = value of goods sent X Quantity in stock
Net quantify received by consignee
Q.24. What are Abnormal losses?
Ans. These losses are more or less abnormal in nature and do not occur often, such as loss of goods in transit, the goods damaged or destroyed by fire.
Q.25. How the abnormal losses treated in consignment account?
Ans. If these losses are allowed to affect the consignment account, the profit on consignment will be unduly and unrealistically affected. The amount of abnormal loss is transferred out of consignment account by debiting to profit and loss account.
Q.26. What is invoicing goods higher than cost?
Ans. Sometime the consignor sends the goods to the consignee at invoice price which does not shows the correct cost. If the goods are priced therein at a price higher then the actual cost price the intention is to keep cost hidden from the consignee. In this case the real cost orthe goods is not disclosed.
Q.27. What will be the entry in the Consignor’s books on sending goods on
consignment to the consignee?
Consignment A/c
To Goods sent on consignment A/c
Being the goods is sent to the consignee on consignment.
Q.28. Pass the entry for the expenses paid by the consignor on the despatch of goods to the consignee in the Consignor’s books. Consignment Account
To cash or Bank A/c
Being the expenses incurred by the consignor
Q.29. Wfiat entry will be made for receiving advance from consignee in the Consignor’s and consignee books?
In the books of consignor Cash/Bank or B/R Account
To consignee’s personal A/c
Being the cash received as advance from the consignee
In the books of consignee
Consignor Personal account
To Cash/Bank or Bills payable account
Being the cash or bill is given as a advance
Q.30. Pass the entry for expenses paid by the consignee in the books of the consignor and consignee.
In the books of consignor Consignment Account
To consignee’s personal A/c
Being the expenses paid by the consignee
In the books of consignee
Consignor personal account
To Cash/Bank account
Expenses incurred on the behalf of consignee
Q.31. Pass the entry in the books of the consignor and consignee for the goods sold by the consignee for cash.
In the books of consignor Consignee’s personal A/c
To consignment Account
Being the goods sold by the consignee.
In the books of consignee
Cash/Bank Account
To Consignor personal account
Cash received from the sale of consignment goods
Q.32. What entry will be made for the goods sold on credit by the consignee in the books of the consignor and consignee.
In the books of consignor Consignee’s personal A/c
To consignment Account
Being the goods sold by.the consignee.
In the books of consignee
Debtor’s Personal Account
To Consignor personal account
Goods sold on credit
Q.33. Show the entry for commission due to the consignee on the sale of goods in the books of the -consignor and consignee.
In the books of consignor Consignment Account.
To consignee’s personal A/c
Being the commission due to the consignee
In the books of consignee
Consignor’s Personal account
To Commission A/c
Being the commission due from consignor
Q.34. What entry will be made in the books of the consignor and consignee for the goods taken over by the consignee for personal use?
In the books of consignor Consignee’s personal A/c
To consignment Account
Being the goods is taken away by the consignee for personal use.
In the books of consignee
Purchases A/c
To Consignor Personal account
Being the goods is taken away for personal use
Q.35. What entry will be passed for expenses incurred by the consignee on the sales of goods in consignor’s and consignee’s books.
In the books of consignor Consignment Account
To consignee’s personal A/c
Being the expenses paid by the consignee
In the books. of consignee
Consignor personal account
To Cash/Bank account
Expenses incurred on the behalf of consignee
Q.36.- Pass the entry for bad debts if the consignee dose not receive del-credre commission in the books of the consignor and consignee.
In the books of consignor Consignment A/c
To Consignee’s personal Being the bad debts recorded
In the books of consignee
Consignor
To Sundry debtors account Being the bad debts recorded
Q.37. Show the entry for bad debts if the consignee received del-credre commission in the books of the consignor and consignee.
In the books of consignor
No Entry
In the books of consignee
Commission A/c
To Sundry debtors account
In the books of consignee
Purchases A/c
To Consignor Personal account
Being the goods is taken away for personal use
Q.35. What entry will be passed for expenses incurred by the consignee on the sales of goods in consignor’s and consignee’s books.
In the books of consignor Consignment Account
To consignee’s personal A/c
Being the expenses paid by the consignee
In the books. of consignee
Consignor personal account
To Cash/Bank account
Expenses incurred on the behalf of consignee
Q.36.- Pass the entry for bad debts if the consignee dose not receive del-credre commission in the books of the consignor and consignee.
In the books of consignor Consignment A/c
To Consignee’s personal Being the bad debts recorded
In the books of consignee
Consignor
To Sundry debtors account Being the bad debts recorded
Q.37. Show the entry for bad debts if the consignee received del-credre commission in the books of the consignor and consignee.
In the books of consignor
No Entry
In the books of consignee
Commission A/c
To Sundry debtors account
Being the bad debts charged from commission earned
Q.38. Show the entry for unsold stock with the consignee in the books of the
consignor.
Stock on consignment A/c
To consignment Account
Being the unsold stock is recorded
Q.39. Pass the entries for abnormal loss of goods in different situations in the books if the consignor.
Profit and loss A/c
To consignment Account
Abnormal loss is transferred to the profit and loss account
Q.40. What entry will be passed for the adjustment of the difference between cost price and invoice price on the total goods sent to the consignee in the books of the consignor.
Goods sent on consignment A/c To consignment Account
Being the adjustment is recorded, of the adjustment of difference between cost price and invoice price.
Q.41. Show the entry for the adjustment of difference between cost price and the invoice price of the unsold stock in the books of the consignor.
Consignment Account To stock Reserve A/c
Being adjustment of difference between cost price and invoice price is recorded
Q.42. What will be the entry for profit earned on consignment in the books of the consignor.
Consignment Account
To profit and loss Account
Being the profit on consignment is transferred to the general profit and loss account
Q.43. Show the entry for loss on consignment in the books of the consignor. Profit and loss Account
To consignment Account
Being the loss is transferred to the profit and loss account
Q.44. Pass the entry for final payment by consignee to the consignor in cash or bank draft, in the books of the consignor and consignee.
Cash or Bank A/c
To consignee personal A/c
Being the received of final settlement by the consignee
Q.45. Show the entry when the goods sent on consignment are transferred to
trading account in the books of the consignor.
Goods sent on consignment A/c
To trading Account
Being the goods sent on consignment account is transferred to trading account
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