AUTHORIZED CAPITAL:
It is the amount of capital with which the company is registered. This capital is memorandum of association. A mention is also made of the number of shares into which fl divided, and of the par value of shares. In later years, if the company wants to either inci this capital, certain legal requirements must be met. This capital is also known as nt registered capital.
ISSUED CAPITAL:
Shares offered to the general public for contribution are known as shares issued. T of such shares is called issued capital. To begin with, a company seldom offers all subscription. Therefore, the amount of issued capital is generally less than the author company has an authorized capital of Rs. 10,00,000 divided into 10,000 shares of Rs.. decide to offer 5,000 shares to the general public. In this case the issued capital is said ti divided into 5,000 shares of Rs. 100 each/The remainder, that is, the difference between t issued capital is known as unissued capital.
SUBSCRIBED CAPITAL:
Out of the total number of shares offered (issued) by the company, that number < taken up by the public is known as shares subscribed. The total par value of such shares is capital. For example, out of the 5,000 shares issued by the company, if the public takes ui subscribed share capital is Rs. 4,50,000 (4,500 shares x Rs. 100 par value of each share).
CALLED-UP CAPITAL:
A company may require payment of the par value either in instalments or in on amount is known as the called-up capital. For example, for each of the 4,500 shares take the company may require a payment of Rs. 70 per share (the remainder Rs. 30 per shar asked for by the company. In this case the called-up capital of the company is Rs. 3,15,p( per share called-up). The difference between the subscribed capital and the called-up c un-called capital. In this case the un-called capital is Rs. 1,35,000 (Rs. 4,50,000 subscr Rs. 3,15,000 called-up capital or 4,500 shares subscribed x Rs. 30 per share uncal Companies Ordinance, 1984, shares are always issued at full price (full amount is called i Therefore, there is no difference between subscribed and called capital.
PAID-UP CAPITAL:
The total amount received by the company out of the total called-up amount is k up capital. Assuming that of Rs. 3,15,000 called-up capital the company received Rs. 3 up capital is in the amount of Rs. 3,00,000. The remainder of Rs. 15,000 is known as call: arears. Now-a-days the total par value is collected at the time of application and as sue are no calls in arrears. Presently, therefore, the subscribed, called-up and paid-up capifc amount.
RESERVE CAPITAL:
It is the portion of the subscribed capital which the company, through a special r to call in the event of winding up. Assume that 4,500 shares Rs. 100 are subscribed, thf to c; 11 Rs. 70 per share and passed a special resolution to the effect that Rs. 30 per share the event of winding up. The company is said to have reserve capital of Rs. 1,35,000 (-share). Reserve capital cannot be turned into ordinary capital without leave of the com dealt with or charged by creditors.
Friday, April 3, 2009
Thursday, April 2, 2009
Accounting Answers
10. What do you understand by proforma invoice?
11. What is abnormal loss of stock?
12. What is normal loss of stock?
13. What is a consignment account?
14. What is the accounting treatment for abnormal loss of stock and normal loss of stoc
15. How the value of unsold stock with the consignee can be calculated?
16. What will be the entries in consignor arid consignee books for goods sent on consig
17. Pass the entries for expenses paid by consignor in consignor and consignee books.IS. What entries will have to be made for receiving advance from consignee in
consignee books? ,
19. Pass the entries if the consignee has accepted a bill of exchange as an advance iiconsignee books.
20. Show the entries for expenses paid by consignee in the consignor and consignee bo
21. For goods sold by consignee, pass the entries in consignor and consignee books.
22. Show the entries for goods sold on credit by consignee in consignor and consignee
23. What will be the entries for commission in consignor and consignee books?
24. - Pass the entries for del-credre commission in consignor and consignee books.
25. Pass the entries for goods taken over by consignee for personal use -in consigncbooks.
26. Show the entries for payment of expenses by consignee personally in consignobooks.
27. Pass the entries for bad debts if the consignee receives the del-credre commissionconsignee books.
28. Pass the entries for bad debts .if the consignee does not receive the del-credriconsignor and consignee books.
29. Show the entries for unsold stock with the consignee in consignor and consignee b
30. What will be the entry for abnormal loss of goods in consignor book, if it is not ins
31. Pass the entries for final payment by consignee to consignor in cash or bank draftconsignee books.
32. What entries will have to be made for final payment by accepting a bill of exchaiin consignor and consignee books?
33. Pass the entries for profit earned on consignment in consignor and consignee book
34. Show the entries for loss on consignment in consignor and consignee books.
35. , What will be the entry when the goods sent on consignment transferred to tr;
consignor book?
36. Show the formula to calculate the value of adjusted per unit cost in case of normal
37. Show one specimen for account sales.
38. Calculate the value of unsold stock in consignment from the following particuli200 @ Rs. 75 each; expenses paid by consignor Rs. 550; unloading expenses pRs. 200; total cases sent on consignment 600.
39. Calculate the value of adjusted per unit cost in case of normal loss from the follov
(a) Original cost of goods consigned Rs. 300,000
(b) Direct expenses Rs. 5,000
(c) Total units of goods Rs. 1,000Units sold
11. What is abnormal loss of stock?
12. What is normal loss of stock?
13. What is a consignment account?
14. What is the accounting treatment for abnormal loss of stock and normal loss of stoc
15. How the value of unsold stock with the consignee can be calculated?
16. What will be the entries in consignor arid consignee books for goods sent on consig
17. Pass the entries for expenses paid by consignor in consignor and consignee books.IS. What entries will have to be made for receiving advance from consignee in
consignee books? ,
19. Pass the entries if the consignee has accepted a bill of exchange as an advance iiconsignee books.
20. Show the entries for expenses paid by consignee in the consignor and consignee bo
21. For goods sold by consignee, pass the entries in consignor and consignee books.
22. Show the entries for goods sold on credit by consignee in consignor and consignee
23. What will be the entries for commission in consignor and consignee books?
24. - Pass the entries for del-credre commission in consignor and consignee books.
25. Pass the entries for goods taken over by consignee for personal use -in consigncbooks.
26. Show the entries for payment of expenses by consignee personally in consignobooks.
27. Pass the entries for bad debts if the consignee receives the del-credre commissionconsignee books.
28. Pass the entries for bad debts .if the consignee does not receive the del-credriconsignor and consignee books.
29. Show the entries for unsold stock with the consignee in consignor and consignee b
30. What will be the entry for abnormal loss of goods in consignor book, if it is not ins
31. Pass the entries for final payment by consignee to consignor in cash or bank draftconsignee books.
32. What entries will have to be made for final payment by accepting a bill of exchaiin consignor and consignee books?
33. Pass the entries for profit earned on consignment in consignor and consignee book
34. Show the entries for loss on consignment in consignor and consignee books.
35. , What will be the entry when the goods sent on consignment transferred to tr;
consignor book?
36. Show the formula to calculate the value of adjusted per unit cost in case of normal
37. Show one specimen for account sales.
38. Calculate the value of unsold stock in consignment from the following particuli200 @ Rs. 75 each; expenses paid by consignor Rs. 550; unloading expenses pRs. 200; total cases sent on consignment 600.
39. Calculate the value of adjusted per unit cost in case of normal loss from the follov
(a) Original cost of goods consigned Rs. 300,000
(b) Direct expenses Rs. 5,000
(c) Total units of goods Rs. 1,000Units sold
Accounting Answers
10. What do you understand by proforma invoice?
11. What is abnormal loss of stock?
12. What is normal loss of stock?
13. What is a consignment account?
14. What is the accounting treatment for abnormal loss of stock and normal loss of stoc
15. How the value of unsold stock with the consignee can be calculated?
16. What will be the entries in consignor arid consignee books for goods sent on consig
17. Pass the entries for expenses paid by consignor in consignor and consignee books.IS. What entries will have to be made for receiving advance from consignee in
consignee books? ,
19. Pass the entries if the consignee has accepted a bill of exchange as an advance iiconsignee books.
20. Show the entries for expenses paid by consignee in the consignor and consignee bo
21. For goods sold by consignee, pass the entries in consignor and consignee books.
22. Show the entries for goods sold on credit by consignee in consignor and consignee
23. What will be the entries for commission in consignor and consignee books?
24. - Pass the entries for del-credre commission in consignor and consignee books.
25. Pass the entries for goods taken over by consignee for personal use -in consigncbooks.
26. Show the entries for payment of expenses by consignee personally in consignobooks.
27. Pass the entries for bad debts if the consignee receives the del-credre commissionconsignee books.
28. Pass the entries for bad debts .if the consignee does not receive the del-credriconsignor and consignee books.
29. Show the entries for unsold stock with the consignee in consignor and consignee b
30. What will be the entry for abnormal loss of goods in consignor book, if it is not ins
31. Pass the entries for final payment by consignee to consignor in cash or bank draftconsignee books.
32. What entries will have to be made for final payment by accepting a bill of exchaiin consignor and consignee books?
33. Pass the entries for profit earned on consignment in consignor and consignee book
34. Show the entries for loss on consignment in consignor and consignee books.
35. , What will be the entry when the goods sent on consignment transferred to tr;
consignor book?
36. Show the formula to calculate the value of adjusted per unit cost in case of normal
37. Show one specimen for account sales.
38. Calculate the value of unsold stock in consignment from the following particuli200 @ Rs. 75 each; expenses paid by consignor Rs. 550; unloading expenses pRs. 200; total cases sent on consignment 600.
39. Calculate the value of adjusted per unit cost in case of normal loss from the follov
(a) Original cost of goods consigned Rs. 300,000
(b) Direct expenses Rs. 5,000
(c) Total units of goods Rs. 1,000Units sold
11. What is abnormal loss of stock?
12. What is normal loss of stock?
13. What is a consignment account?
14. What is the accounting treatment for abnormal loss of stock and normal loss of stoc
15. How the value of unsold stock with the consignee can be calculated?
16. What will be the entries in consignor arid consignee books for goods sent on consig
17. Pass the entries for expenses paid by consignor in consignor and consignee books.IS. What entries will have to be made for receiving advance from consignee in
consignee books? ,
19. Pass the entries if the consignee has accepted a bill of exchange as an advance iiconsignee books.
20. Show the entries for expenses paid by consignee in the consignor and consignee bo
21. For goods sold by consignee, pass the entries in consignor and consignee books.
22. Show the entries for goods sold on credit by consignee in consignor and consignee
23. What will be the entries for commission in consignor and consignee books?
24. - Pass the entries for del-credre commission in consignor and consignee books.
25. Pass the entries for goods taken over by consignee for personal use -in consigncbooks.
26. Show the entries for payment of expenses by consignee personally in consignobooks.
27. Pass the entries for bad debts if the consignee receives the del-credre commissionconsignee books.
28. Pass the entries for bad debts .if the consignee does not receive the del-credriconsignor and consignee books.
29. Show the entries for unsold stock with the consignee in consignor and consignee b
30. What will be the entry for abnormal loss of goods in consignor book, if it is not ins
31. Pass the entries for final payment by consignee to consignor in cash or bank draftconsignee books.
32. What entries will have to be made for final payment by accepting a bill of exchaiin consignor and consignee books?
33. Pass the entries for profit earned on consignment in consignor and consignee book
34. Show the entries for loss on consignment in consignor and consignee books.
35. , What will be the entry when the goods sent on consignment transferred to tr;
consignor book?
36. Show the formula to calculate the value of adjusted per unit cost in case of normal
37. Show one specimen for account sales.
38. Calculate the value of unsold stock in consignment from the following particuli200 @ Rs. 75 each; expenses paid by consignor Rs. 550; unloading expenses pRs. 200; total cases sent on consignment 600.
39. Calculate the value of adjusted per unit cost in case of normal loss from the follov
(a) Original cost of goods consigned Rs. 300,000
(b) Direct expenses Rs. 5,000
(c) Total units of goods Rs. 1,000Units sold
LOSS Details
Normal LOSS of Goods: On 1st Jan. 2005, Mohsin Coal Co. of Quetta consigned to Rftinzan Ltd. of Lahore 10,000 tons of coal. The cost of coal was Rs. 40 per ton and railway charges were Rs. 10 per ton. On 25th Feb., an Account sales was received From Ram/an Ltd. showing that 5000 tons of coal sold («; Rs. 80 per ton; sales expenses Rs. 4000, Insurance Rs.
1000, commission 5 % on sales. The agent enclosed a bill for the sales proceeds less expenses and reported a shortage of 100 tons on the whole consignment. Show the consignment account In books of Mohsin Coal Co.
Ans: [Profit on consignment Rs. 122474.75}
13. Abnormal Loss: M/s Naeem Motors sent 100 cars to Haseeb on consignment. The cost of each car was Rs. 12,000. The expenses of M/s Naeem Motors were:
Freight Rs. 7,000, Insurance Rs. 3,000.
During transit one car was destroyed and the insurance company admitted Rs. 9000 towards that claim.
Haseeb sold 7 cars at Rs. 15,000 each and paid for storage and insurance Rs. 3,400. Haseeb then accepted a bill for Rs. 90,000, at 3 months drawn by M/s Naeem Motors which they discounted immediately with their bank at 6 % p.a. It was agreed that Haseeb is to get 5 % commission.
Give the consignment account In the books of M/s Naeem Motors. Ans: [Profit on consignment Rs. II650, Abnormal Loss Rs. 3100]
14. Bilal of Lahore consigned 100 cases of candles to Abdullah of Mardan which cost him Rs. 50 per case. He incurred the following costs: packing Rs. 100; carriage Rs. 150 and Railway freight Rs. 200. Some of the cases were damaged in transit and Abdullah took delivery of 90 cases only. Abdullah spent Rs. 50 for cartage and Rs. 300 for godown rent and sold the consignment at Rs. 60 per case. He Sent the net amount to Bilal after deducting his expenses and commission at the rate of 5% on the sale proceeds together with his Account Sales. Bilal also received Rs. 300 from the Railway for damages. Show how the consignment account would appear in books of Bilal.
Ans: [Loss on consignment Rs. 125, Abnormal Loss Rs. 245]
1000, commission 5 % on sales. The agent enclosed a bill for the sales proceeds less expenses and reported a shortage of 100 tons on the whole consignment. Show the consignment account In books of Mohsin Coal Co.
Ans: [Profit on consignment Rs. 122474.75}
13. Abnormal Loss: M/s Naeem Motors sent 100 cars to Haseeb on consignment. The cost of each car was Rs. 12,000. The expenses of M/s Naeem Motors were:
Freight Rs. 7,000, Insurance Rs. 3,000.
During transit one car was destroyed and the insurance company admitted Rs. 9000 towards that claim.
Haseeb sold 7 cars at Rs. 15,000 each and paid for storage and insurance Rs. 3,400. Haseeb then accepted a bill for Rs. 90,000, at 3 months drawn by M/s Naeem Motors which they discounted immediately with their bank at 6 % p.a. It was agreed that Haseeb is to get 5 % commission.
Give the consignment account In the books of M/s Naeem Motors. Ans: [Profit on consignment Rs. II650, Abnormal Loss Rs. 3100]
14. Bilal of Lahore consigned 100 cases of candles to Abdullah of Mardan which cost him Rs. 50 per case. He incurred the following costs: packing Rs. 100; carriage Rs. 150 and Railway freight Rs. 200. Some of the cases were damaged in transit and Abdullah took delivery of 90 cases only. Abdullah spent Rs. 50 for cartage and Rs. 300 for godown rent and sold the consignment at Rs. 60 per case. He Sent the net amount to Bilal after deducting his expenses and commission at the rate of 5% on the sale proceeds together with his Account Sales. Bilal also received Rs. 300 from the Railway for damages. Show how the consignment account would appear in books of Bilal.
Ans: [Loss on consignment Rs. 125, Abnormal Loss Rs. 245]
STOCK KINDS
ABNORMAL LOSS OF STOCK:
Any abnormal loss e.g. loss due to fire, accident, theft, negligence, etc. will be treated in the books of consignor in such a manner that consignment profit is not reduced. While calculating the value of loss, proportionate 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, etc. is termed as 'normal loss1. 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 proportionate non-recurring expenses are included in the value of stock. Non-recurring expenses will include all such expenses, which have been incurred up to the time goods have reached to agent's selling place e.g. freight, cartage, transit insurance, octroi, import duty, customs charges, packing, etc. will be [included for stock valuation. Expenses like godown rent, godown insurance, sales expenses are not rhided in the value of stock. Market value is the net realizable value i.e. sales commission and other
ihie sales expenses are deducted from the market value on the closing date. ;{j) OVERRIDING COMMISSION:
Extra commission is normally granted by the consignor when he desires his agent to work hard to posh a new line of product in the market.
! CONSIGNOR'S BOOKS:
As already stated the goods sent by the consignor are sold on his behalf therefore he would iike to the profit earned or loss suffered from each different consignment. Before we discuss the entries in books of the consignor it is helpful to understand the nature of the following:
tNSIGNMENT ACCOUNT:
This is by nature a profit & Loss Account. One separate account is devoted to each different signment with the heading "Consignment to ... account". Actually the consignment account is a rieular Trading and Profit and Loss Account. All expenses specially related to the consignment must debited to the concerned consignment account whether incurred by the consignor or by the consignee all revenues (goods sold by the consignee and unsold goods with the consignee) should be credited to account. The difference between the two sides of this account will show the result of that particular iignment.
ISIGNEE'S ACCOUNT:
This is a personal account. It should be noted that the consignee is not the buyer. His personal it, therefore, is not debited when goods are sent to him. In cases where it is customary for the signce to send some money as an advance against the consignment the payment is merely an advance way of security) and not a part payment. Hence the advance received from the consignee should be :d to the credit side of consignee's personal account. In case part of the stock is still lying unsold the jrtionate amount of advance should be carried down as credit balance in consignee's personal account. :ase where consignor draws a bill on consignee the bill is known as a documentary bill.
Any abnormal loss e.g. loss due to fire, accident, theft, negligence, etc. will be treated in the books of consignor in such a manner that consignment profit is not reduced. While calculating the value of loss, proportionate 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, etc. is termed as 'normal loss1. 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 proportionate non-recurring expenses are included in the value of stock. Non-recurring expenses will include all such expenses, which have been incurred up to the time goods have reached to agent's selling place e.g. freight, cartage, transit insurance, octroi, import duty, customs charges, packing, etc. will be [included for stock valuation. Expenses like godown rent, godown insurance, sales expenses are not rhided in the value of stock. Market value is the net realizable value i.e. sales commission and other
ihie sales expenses are deducted from the market value on the closing date. ;{j) OVERRIDING COMMISSION:
Extra commission is normally granted by the consignor when he desires his agent to work hard to posh a new line of product in the market.
! CONSIGNOR'S BOOKS:
As already stated the goods sent by the consignor are sold on his behalf therefore he would iike to the profit earned or loss suffered from each different consignment. Before we discuss the entries in books of the consignor it is helpful to understand the nature of the following:
tNSIGNMENT ACCOUNT:
This is by nature a profit & Loss Account. One separate account is devoted to each different signment with the heading "Consignment to ... account". Actually the consignment account is a rieular Trading and Profit and Loss Account. All expenses specially related to the consignment must debited to the concerned consignment account whether incurred by the consignor or by the consignee all revenues (goods sold by the consignee and unsold goods with the consignee) should be credited to account. The difference between the two sides of this account will show the result of that particular iignment.
ISIGNEE'S ACCOUNT:
This is a personal account. It should be noted that the consignee is not the buyer. His personal it, therefore, is not debited when goods are sent to him. In cases where it is customary for the signce to send some money as an advance against the consignment the payment is merely an advance way of security) and not a part payment. Hence the advance received from the consignee should be :d to the credit side of consignee's personal account. In case part of the stock is still lying unsold the jrtionate amount of advance should be carried down as credit balance in consignee's personal account. :ase where consignor draws a bill on consignee the bill is known as a documentary bill.
Wednesday, April 1, 2009
OBJECTIVE QUESTIONS ACCOUNTING
OBJECTIVE QUESTIONS
• True/False.
1. Consignment signifies forwarded of goods from one place to another.
2. Manufacturers acts as a principal in consignment.
3. Consignee acts as an agent in consignment.
4. The relationship between consignor and consignee is that of seller and buyer.
5. In sales, the relationship between buyer and seller is that of debtor and creditor.
6. Consignment is an act of sending goods by owner to his- agent for sale purpose.
7. Consignment outward book treatment is similar to cash book.
8. The remuneration of the consignee for selling the goods of consignor is known as con
9. Del- credre commission is calculated on total sales.
10. Stock on consignment is the asset of the consignee.
11. Stock on consignment is the unsold stock of goods with the consignee.
12. Normal loss occurs due to leakage.
13. Abnormal loss occurs due to evaporation.
14. Normal loss and abnormal loss does not affect on the working of stock on consignme
15. Account sales is prepared by consignee.
16. Proforma invoice send by consignor to the consignee,
17. Consignment account is a nominal account.
18. Goods sent on consignment is a nominal account.
19. Consignee and consignor are personal accounts.
20. Forwarding letter in consignment is known as proforma invoice.
• Kill in the Blanks.
1. -------------------- is an act of sending the goods by the owner to his agent for the purp
2. is a person who sends his goods for sale purpose in consignment
3. is a person to whom goods are consigned for sale purpose in consig
4. In consignment, generally the manufacturers or producers are the------------------- .
5. The relationship between consignor and consignee is that of-------------------- and —
6. The dispatch of goods by the consignor to the consignee will be a--------------------- 1
view point.
7. The dispatch of goods by the consignor to the consignee will be a -----
consignee's view point.
8. The book which is maintained by consignor for the goods consigned is known as -
9. The accounting treatment of consignment outward book is similar to----------------
10. The book which is maintained by consignee for goods received from differiknown as-------------------- .
• True/False.
1. Consignment signifies forwarded of goods from one place to another.
2. Manufacturers acts as a principal in consignment.
3. Consignee acts as an agent in consignment.
4. The relationship between consignor and consignee is that of seller and buyer.
5. In sales, the relationship between buyer and seller is that of debtor and creditor.
6. Consignment is an act of sending goods by owner to his- agent for sale purpose.
7. Consignment outward book treatment is similar to cash book.
8. The remuneration of the consignee for selling the goods of consignor is known as con
9. Del- credre commission is calculated on total sales.
10. Stock on consignment is the asset of the consignee.
11. Stock on consignment is the unsold stock of goods with the consignee.
12. Normal loss occurs due to leakage.
13. Abnormal loss occurs due to evaporation.
14. Normal loss and abnormal loss does not affect on the working of stock on consignme
15. Account sales is prepared by consignee.
16. Proforma invoice send by consignor to the consignee,
17. Consignment account is a nominal account.
18. Goods sent on consignment is a nominal account.
19. Consignee and consignor are personal accounts.
20. Forwarding letter in consignment is known as proforma invoice.
• Kill in the Blanks.
1. -------------------- is an act of sending the goods by the owner to his agent for the purp
2. is a person who sends his goods for sale purpose in consignment
3. is a person to whom goods are consigned for sale purpose in consig
4. In consignment, generally the manufacturers or producers are the------------------- .
5. The relationship between consignor and consignee is that of-------------------- and —
6. The dispatch of goods by the consignor to the consignee will be a--------------------- 1
view point.
7. The dispatch of goods by the consignor to the consignee will be a -----
consignee's view point.
8. The book which is maintained by consignor for the goods consigned is known as -
9. The accounting treatment of consignment outward book is similar to----------------
10. The book which is maintained by consignee for goods received from differiknown as-------------------- .
Accounting Problem
Direct expenses included in valuation of closing stock 1/5 of Rs, 1,800
LOSS OF STOCK OR GOODS
Where part of the goods sent on consignment are damaged or lost in transit the tre books of account will depend upon the nature of loss i.e. whether normal or abnormal.
NORMAL LOSS:
Loss of quantity of goods in the normal course of business and inherent and thus unavoidable, such as loss because of loading or unloading of goods, leakage, evaporation o: known as normal loss.
Treatment of normal loss is to charge it to the consignment account. The total cost olcharged to the units remaining. Value of stock is inflated to cover the normal loss or 1absorbed by the remaining units. For example, if 2000 Radio sets are consigned @ Rs. 300freight being Rs. 10,000. Owing to normal loss only 1960 Radio sets are received by the coquantity unsold at the end of the year is 500 Radio sets, the value of closing6,00,000 + 10,000 ... it,
1960
x 500 or Rs. 152500. Being normal such a loss is a part of the cost of the consi
separate entry is passed in the books of the consignor. Anyhow, such loss is considered w<> quantity of stock bears to the total quantity of goods consigned as diminished by the norma in brief valuation of stock will be made;
Original cost of goods consigned + Direct Expenses
Total units of goods-units lost AdJusted P* unlt c
Then; Adjusted per unit cost x unsold units = Value of unsold sto
ILLUSTRATION NO. 5
Nawaz Sugar Mills Ltd. Gujrat consigned 200 bags of sugar to their agent Peshawar. Each bag costing Rs. 300. They paid Rs. 1000 towards freight & insurance. 2 bags were completely damaged due to unloading and Mr. Arshad took the deliv consignment and immediately accepted a bill drawn on him for Rs. 20000 for two mo months, he reported that:
140 bags were sold @ Rs. 350.
He had incurred the following expenses; Godown rent Rs. 1400, clear!1800, carriage outwards Rs. 600.
He is entitled to a commission of 10 */• on sales. Assuming that Mr. Arshad rei by a bank draft, prepare necessary Accounts In books of the consignor.
LOSS OF STOCK OR GOODS
Where part of the goods sent on consignment are damaged or lost in transit the tre books of account will depend upon the nature of loss i.e. whether normal or abnormal.
NORMAL LOSS:
Loss of quantity of goods in the normal course of business and inherent and thus unavoidable, such as loss because of loading or unloading of goods, leakage, evaporation o: known as normal loss.
Treatment of normal loss is to charge it to the consignment account. The total cost olcharged to the units remaining. Value of stock is inflated to cover the normal loss or 1absorbed by the remaining units. For example, if 2000 Radio sets are consigned @ Rs. 300freight being Rs. 10,000. Owing to normal loss only 1960 Radio sets are received by the coquantity unsold at the end of the year is 500 Radio sets, the value of closing6,00,000 + 10,000 ... it,
1960
x 500 or Rs. 152500. Being normal such a loss is a part of the cost of the consi
separate entry is passed in the books of the consignor. Anyhow, such loss is considered w<> quantity of stock bears to the total quantity of goods consigned as diminished by the norma in brief valuation of stock will be made;
Original cost of goods consigned + Direct Expenses
Total units of goods-units lost AdJusted P* unlt c
Then; Adjusted per unit cost x unsold units = Value of unsold sto
ILLUSTRATION NO. 5
Nawaz Sugar Mills Ltd. Gujrat consigned 200 bags of sugar to their agent Peshawar. Each bag costing Rs. 300. They paid Rs. 1000 towards freight & insurance. 2 bags were completely damaged due to unloading and Mr. Arshad took the deliv consignment and immediately accepted a bill drawn on him for Rs. 20000 for two mo months, he reported that:
140 bags were sold @ Rs. 350.
He had incurred the following expenses; Godown rent Rs. 1400, clear!1800, carriage outwards Rs. 600.
He is entitled to a commission of 10 */• on sales. Assuming that Mr. Arshad rei by a bank draft, prepare necessary Accounts In books of the consignor.
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