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COPYRIGHT © 2013 Parag Sodhani. All Rights Reserved. No part of this Visual Presentation may be reproduced or redistributed, in any form or by any means [graphic, electronic or mechanical, including photocopying, recording, taping or otherwise] or reproduced on any disc, tape, perforated media or other information storage device etc. without prior written permission of the Preparer. Breach of this condition is liable for legal action.
Consignor
Consignee
Mr. Amit remits all sales
proceeds to Mr. Vivek, after
deducting his expenses and
‘Commission’, together with an
‘Account Sales’.
Mr. Vivek sends his goods to Mr. Amit, together
with a ‘Proforma Invoice’, to sell such goods
on behalf of &
at the Risk of Mr. Vivek
Mr. Vivek
Mr. Amit
Sale to Buyers
A Statement showing Amount to be Remitted
to Consignor, after making deductions
Agent of Mr. Vivek
Principal of Mr. Amit
Proforma Invoice
Quantity Rate etc.
Account Sales
……………………………………………………………………………………………………………………………….……-……………………………………………………………………………………………………………………………………..
.
`
3
Account Sales
This is
called
Commission paid to Consignee as reward for
his work done
Additional commission paid to encourage
consignee to make credit sales
This is the additional commission paid to consignee,
To promote sales at higher prices than specified, or
To encourage consignee to put hard work in introducing
a new product.
Bad-debts are borne by Consignor
Bad-debts are borne by Consignee
It is paid as Fixed
percentage of Gross
Sale
Unless otherwise
agreed, it is paid on
Total Sales [not only
Credit Sales]
As per Agreement, it is
paid on
Total Sales, or
Difference b/w Actual
Sale value & Specified value
Ordinary
Commission
Del-credere
Commission
Over-riding
Commission
--
Calculation of Commission
Types of Commission
4
500 units, Cost `200
each
4/5th goods for `95,000
Commission = 2% on Sales + 20% of Gross Sales less All Commission, exceeds Cost price
Commission 4% on Sales @
`225 p.u.
20% of any Surplus
price realised + =
Out of Sales `95,000, Credit sales were `50,000
Commission 4% on Sales 2% Del-credere Comm. + =
500 units, Cost `200
each
5
= 2% on Total Sales + 20% of [Gross Sales – All Commissions – Cost price]
Implies
Commission
Calculate Commission in Following Cases :
= 2% * 95,000 + 20% * [95,000 – X – 80,000] X
= 4083.33 = Commission X
Commission 4% (225 * 400) 20% [95,000–(225 * 400)] + =
4,600 =
Commission 4% * 95,000 2% * 95,000 + =
5,700 =
Consignor
Sale to Buyers
Mr. Vivek
Consignor’s expenses
Loading,
freight,
insurance-in-transit etc.
Consignee’s exp. (upto goods reach his
premises)
Unloading,
Custom duty, Octroi
Carriage inwards,
Transportation etc.
Expenses related to sales
Selling & Distribution
expenses
Non-recurring exp.
Consignee
Mr. Amit
6
Expenses while in premises
Godown rent
Insurance charges Office & admin. etc.
Recurring exp.
Here are the various
Expenses incurred at different stages of Consignment
All expenses incurred by consignor
Cost Price
Net Realizable
Value (NRV)
Purchase Price
All expenses incurred
to bring goods to their
present location &
condition or
Whichever is
lesser
Expected Sale Price
of Unsold goods
Selling expenses
PLUS
MINUS
Expenses incurred by consignee till goods have finally reached
his godown i.e. only Non-recurring expenses of Consignee
Valuation of Consignment Stock At the year-end, any Unsold goods with Consignee, will be
treated as Stock of Consignor
7
Consignor’s expenses
` 4,000
Consignee’s expenses
Non-recurring
`1,000
Consignee’s expenses
Recurring
`2,000
500 units Cost `400
each
Particulars Amt. / Units
Cost of goods
Consignor’s
Expenses Consignee’s Non-R Exp.
Total cost of goods
consigned
2,00,000
4,000
1,000
2,05,000
No. of Units 500 u
Cost per unit `410
Value of Stock at Cost
[200u]
82,000
500 units Cost `400
each
300 units Sold
Valuation of Stock at
Cost
8
In some cases, Consignor prepares Proforma Invoice, at a price more than Cost Price (say, 100+20).
Such price is called ‘Invoice Price’
Consigning goods above Cost Price has 2 impacts :
‘Goods sent’ are
recorded at Invoice
price
Unsold Stock at the end
of year, is also valued
at Invoice price
To ascertain True Profit/Loss
position, both above should be
recorded at Cost
passing a Reverse
Journal entry transferring the loading
to a Reserve,called
‘Stock Reserve’
Effect of Loading is Removed by
Effect of Loading is removed by
Consignment at ‘Above Cost Price’
9
Consignment A/c
Dr. 120
To Goods Sent on Consignment
120
Goods Sent on Consignment
Dr. 20
To Consignment 20
Closing Stock Dr. 120 To Consignment 120
Consignment Dr. 20 To Stock Res. 20
Goods costing `80,000 Sent at Cost + 25%
Invoice Value = ??
Goods Costing `1,00,000 Sent at 20% profit on Invoice Value
Invoice Value = ??
20% of the Goods, whose Invoice
value was `15,000, were destroyed. Invoice Value of Goods sent = ??
Goods Invoiced at `1,00,000 Sent at Cost + 20%
Cost = ??
` 1,00,000 ` 1,25,000
` 75,000 ` 83,333
10
Practice Questions
Goods costing
`1,00,000
4/5th goods for
`1,10,000
Cost + 25%
Commission 4% upto
Invoice Value
20% of any Surplus
above Invoice Value + =
11
Calculate Commission in Following Case :
Consignor’s expenses
` 4,000
Consignee’s expenses
Non-recurring
`1,000
500 units Cost `400
each
Particulars Amt. / Units
Total cost of goods consigned at
I/P
[(500*500) + 4000 + 1000]
2,55,000
No. of Units 500 u
Cost per unit `510
Value of Stock at I/P
[200u]
1,02,000
500 units I/P `500
each
300 units sold
Value of Stock at Cost
[200u]
82,000
Amount of Stock Reserve 20,000 Loading on 1 unit (500-400) = `100
Loading on Stock of 200 units = `100 * 200
= 20,000 = Stock Reserve
Valuation of Stock at Invoice Pr.
Amount of Stock Reserve
12
Consignee’s expenses
Recurring
`2,000
Simpler way to calculate Stock Reserve :
Sale to Buyers
Loss
es
Abnormal Loss
Avoidable losses, due to abnormal factors like fire, theft. [Loss-in-transit; Loss in
consignee’s godown]
Not treated as part of cost
Valuation just as of Closing Stock
Normal Loss
Unavoidable losses, due to inherent features of goods
e.g. evaporation.
Treated as part of cost
No separate valuation is done
Loss-in-Transit Loss at Godown
13
1/10th units Lost in Godown
Consignor’s expenses
` 4,000
Consignee’s expenses
Non-recurring
`1,000
Consignee’s expenses
Recurring
`2,000
500 units Cost `400
each
Particulars If Loss is Abnormal
If Loss is Normal
Total cost of goods consigned at
I/P
[(500*400) + 4000 + 1000]
2,05,000
This Cost is borne by 500 u
Cost per unit `410
500 units Cost `400
each
300 units Sold
Value of Stock [150u] 61,500
Value of Loss [50u] 20,500
Valuation of Loss
Valuation of Stock
- Loss in Godown
2,05,000
450 u
`455.5
68,325
–
Normally, it must be treated as ‘Abnormal Loss’ 14
Loss-in-transit – 1/10th goods
Consignor’s expenses
` 4,000
Consignee’s expenses
Non-recurring
`1,000
500 units Cost `400
each
450 units Cost `400
each
Consignee’s expenses
Recurring
`2,000
300 units Sold
Particulars Loss is Abnormal Loss is Normal
Consignors’ exp. 4,000
Borne by All 500 u
Cost p.u. of all units [500] ` 408
Valuation of Loss
Valuation of Stock
- Loss in Transit
Cost of units 2,00,000
2,04,000
Consignee’s Non-R exp. 1,000
Borne by Only 450 u
Cost p.u. of good units [450] ` 2.2
Total cost p.u. for good units 410.2
Value of Stock [150 Good
units] 61,530
Value of Lost goods [50u *
408] 20,400
4,000
450 u
` 453.3
2,00,000
2,04,000
1,000
450 u
` 2.2
455.5
68,325
– 15
16
Date Particulars Amt. (`)
Date Particulars Amt. (`)
All Expenses of Consignor
[To Cash A/c]
Goods sent (At Invoice Value)
[To Goods Sent on Consignm. A/c] Sale Proceeds from Consignee
[By Consignee’s A/c]
Stock on Consignment (At Inv. Val.)
[By Stock A/c]
Goods sent (Loading)
[By Goods Sent on Consign. A/c] All Expenses of Consignee
[To Consignee’s A/c]
Loss on Consignment
[By P & L A/c]
Bad-debts (IF Consignee is not to bear Risk of Bad-debts)
[To Consignee’s A/c]
Consignment A/c
Commission
[To Consignee’s A/c]
Profit on Consignment
[To P & L A/c]
Stock on Consignment (Loading)
[To Stock Reserve A/c]
Following is the Consignment Account which helps to
Learn Journal Entries of Consignment, and
Calculate Profit/Loss on Consignment
Account Sales
Actual Sales xx
(-) All Expenses incurred by Consignee
xx
(-) Bad-debts (if no del-credere commission)
xx
(-) Commission due to him xx (-) Advance already given to
consignor xx
Amount to be remitted xx
17
Following is the Account Sales which helps to
Calculate the amount to be remitted by Consignee to
Consignor
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