accounting

ABNORMAL LOSS OF STOCK:
abnormal loss e.g. loss due to fire, accident, theft, negligence, etc. will be treated in the books ^consignor in such a manner that consignment profit is not reduced. While calculating the value of loss, tionate expenses up to the time of occurrence of loss are included. NORMAL LOSS OF STOCK: A loss which occurs due to natural causes e.g. normal leakage, loss in weight due to nature of goods, . is termed as 'normal loss'. Such loss inflates the value of closing stock. VALUATION OF CLOSING STOCK WITH CONSIGNEE: Closing stock with consignee is valued at cost or market price whichever is less. To ascertain cost tionate non-recurring expenses are included in'the value of stock. Npn—recurring expenses will all such expenses, which have been incurred up to the time goods have reached to agenfs selling e.g. freight, cartage, transit insurance, octroi, import duty, customs charges, packing, etc. will be for stock valuation. Expenses like godown rent, godown insurance, sales expenses are not in the value of stock. Market value is the net realizable value i.e. sales commission and other We sales expenses are deducted from the market value on the closing date. OVERRIDING COMMISSION: Extra commission is normally granted by the consignor when he desires his agent to work hard to ka new line of product in the market. SNOR'S BOOKS: As already stated the goods sent by the consignor are sold on his behalf therefore he would like tor Ac profit earned or loss suffered from each different consignment. Before we discuss the entries in;of the consignor it is helpful to understand the nature of the following: " WENT ACCOUNT: This is by nature a profit & Loss Account. One separate account is devoted to each different with the heading "Consignment to ... account". Actually the consignment account is a • Trading and Profit and Loss Account. All expenses specially related to the consignment must to the concerned consignment account whether incurred by the .consignor or by the consignee I revenues (goods sold by the consignee and unsold goods with the consignee) should be credited to nt The difference between the two sides of this account will show the result of that particular personal ACCOUNT: I1iis is a personal account. It should be noted that the consignee is not the buyer. His personal therefore, is not debited when goods are sent to him. In cases where it is customary for the : to send some money as an advance against the consignment the payment is merely an advance r of security) and not a part payment. Hence the advance received from the consignee should be • the credit side of consignee's personal account In case part of the stock is still lying unsold the ! amount of advance should be carried down as credit balance in consignee's personal account. ; consignor draws a bill on consignee the bill is known as a documentary bill.