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PROBLEMS

The document discusses accounting entries related to consignment transactions. It provides examples of journal entries to record sending goods on consignment, related expenses, advances received, and sales of consigned goods. It also includes example consignment accounts and calculations of profit or loss on consignments.

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21 views5 pages

PROBLEMS

The document discusses accounting entries related to consignment transactions. It provides examples of journal entries to record sending goods on consignment, related expenses, advances received, and sales of consigned goods. It also includes example consignment accounts and calculations of profit or loss on consignments.

Uploaded by

studentofficeracademy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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CHAPTER 01---------→PROBLEM NO 07

Starting with the opening balances:


- Cash in hand: Rs. 3,450
- Cash at bank: Rs. 55,370
- Stock: Rs. 56,900
- Sundry debtors: Rs. 32,750
- Furniture: Rs. 2,100
- Sundry creditors: Rs. 34,570

Ending balances:
- Cash in hand: Rs. 4,500
- Cash at bank: Rs. 24,300
- Stock: Rs. 46,800
- Sundry debtors: Rs. 46,200
- Furniture: Rs. 2,500
- Sundry creditors: Rs. 43,500

Withdrawals made during the year: Rs. 65,000 (of which Rs. 56,000 was spent on purchasing a car for the business)

To calculate the net profit, we need to consider the changes in the merchant's assets and liabilities, excluding the
withdrawals.

Changes in assets:
- Cash: (4,500 - 3,450) = Rs. 1,050 (increase)
- Cash at bank: (24,300 - 55,370) = Rs. -31,070 (decrease)
- Stock: (46,800 - 56,900) = Rs. -10,100 (decrease)
- Sundry debtors: (46,200 - 32,750) = Rs. 13,450 (increase)
- Furniture: (2,500 - 2,100) = Rs. 400 (increase)

Changes in liabilities:
- Sundry creditors: (43,500 - 34,570) = Rs. 8,930 (increase)

Net profit can be calculated as follows:


Net profit = (Increase in assets - Decrease in assets) - Increase in liabilities
Net profit = (1,050 + 13,450 + 400) - (-31,070 + 10,100 + 8,930)
Net profit = Rs. 29,800

Therefore, the net profit for the year ended 31 December 2006 is Rs. 29,800.

CHAPTER 02----→ PROBLEMS

QUESTION 01…………………………………………………………………………………….

• 1. Journal entries:
a) To record the consignment of goods from Faizan to Khalid:
Consignment A/c Dr. 120,000
To Goods Sent on Consignment A/c 120,000

b) To record the payment of cartage and insurance by Faizan:


Cartage A/c Dr. 5,000
Insurance A/c Dr. 3,000
To Cash A/c 8,000

c) To record the receipt of the draft from Khalid:


Cash A/c Dr. 30,000
To Khalid A/c 30,000

2. Consignment Account (in the books of Faizan):

Particulars Amount (Rs.) Particulars Amount (Rs.)


To Goods Sent on Consignment A/c 120,000 By Sales A/c 160,000
To Cartage A/c 5,000 By Khalid A/c (Advance) 30,000
To Insurance A/c 3,000 By Commission (5% on sales) 8,000
To Expenses A/c 2,000 By Profit on Consignment A/c 22,000
To Khalid A/c (Draft) 30,000
To Balance (Profit) 22,000
_______ _______
182,000 182,000

Note: The balance of Rs. 22,000 on the credit side represents the profit on consignment.

Therefore, the profit on consignment in the books of Faizan is Rs. 22,000.

QUESTION 02…………………………………………………………………..

Consignment of 2000 mobiles from Ammad to Ishaq:


Consignment Account (Debit) 120,000
To Sales Account (Credit) 120,000

2. Cost of mobiles:
Consignment Account (Debit) 120,000
To Purchases Account (Credit) 120,000

3. Cartage paid by Ammad:


Consignment Account (Debit) 4,000
To Cash Account (Credit) 4,000

4. Duty paid by Ishaq:


Consignment Account (Debit) 3,000
To Cash Account (Credit) 3,000

5. Godown rent paid by Ishaq:


Consignment Account (Debit) 2,000
To Cash Account (Credit) 2,000

6. Commission payable to Ishaq (5% of sales):


Consignment Account (Debit) 6,000
To Commission Payable Account (Credit) 6,000

7. Bank draft received by Ammad for the balance:


Cash Account (Debit) 89,000
To Consignment Account (Credit) 89,000
Now, let's calculate the loss on consignment:
Total sales = Rs. 120,000
Total cost of mobiles = 2000 * Rs. 60 = Rs. 120,000
Loss on consignment = Total cost of mobiles – Tot

QUESTION 03…………………………………………………………………..

To record consignment sent to Karim & Co. in Faisalabad and Lahore:

Consignment to Karim & Co. Account Dr. Rs. 15,000


To Goods on Consignment Account Rs. 15,000
b. To record expenses on freight and packing:

Goods on Consignment Account Dr. Rs. 300


To Cash/Bank Account Rs. 300
c. To record all-inclusive expenses:

Goods on Consignment Account Dr. Rs. 1,150


To Cash/Bank Account Rs. 1,150
d. To record the advance sent by Karim & Co.:

Karim & Co. Account Dr. Rs. 10,000


To Bank Account Rs. 10,000
2. Consignment Account in the Books of Mufti Radio House:

Consignment Account
-------------------------------------------------------------------------------------------------------
Particulars | Amount (Rs.) | Particulars | Amount (Rs.)
-------------------------------------------------------------------------------------------------------
To Goods on Consignment | 15,000 | By Karim & Co. Account | 20,000
To Freight and Packing Expenses | 300 | By Profit on Consignment | 1,550
To All-Inclusive Expenses | 1,150 | By Balance (Closing Stock) | 13,300
To Advance to Karim & Co. | 10,000 |
-------------------------------------------------------------------------------------------------------
Total | 26,450 | Total | 26,450
-------------------------------------------------------------------------------------------------------
3. Journal Entry for Profit on Consignment:

Profit and Loss Account Dr. Rs. 1,550


To Consignment Account Rs. 1,550
This journal entry is made to transfer the profit on consignment to the Profit and Loss Account.

These entries reflect the transactions related to the consignment and the resulting profit for Mufti Radio House.

QUESTION 04………………………………………………………………………………………………

1. On March 31st, when the goods were sent on consignment:


• Debit: Consignment A/c Rs. 250,000
• Credit: Goods Sent on Consignment A/c Rs. 250,000
• Debit: Cash/Freight A/c Rs. 15,000
• Credit: Consignment A/c Rs. 15,000
2. On June 30th, when Nasir received an account sales:
• Debit: Nafees & Co. A/c Rs. 400,000
• Credit: Consignment A/c Rs. 400,000
3. To record the expenses incurred by Nasir:
• Debit: Consignment A/c Rs. 26,000
• Credit: Carriage A/c Rs. 20,000
• Credit: Storage A/c Rs. 4,000
• Credit: Delivery Charges A/c Rs. 2,000
4. To record the commission for the consignee:
• Debit: Nafees & Co. A/c Rs. 21,000
• Credit: Commission on Consignment A/c Rs. 21,000
5. To record the del-credere commission:
• Debit: Commission on Consignment A/c Rs. 8,000
• Credit: Del-Credere Commission A/c Rs. 8,000
6. To close the accounts and transfer the profit:
• Debit: Consignment A/c Rs. 81,000
• Credit: Profit and Loss A/c Rs. 81,000

These entries reflect the various transactions and expenses related to the consignment
in the books of Nasir & Co.
QUESTION 05………………………………………………………………………………………………………………………………………………………………………………………

1. Upon receiving the consignment:


• Debit: Goods Consignment A/c Rs. 10,000
• Credit: Riaz Sugar Factory A/c Rs. 10,000 (Being the receipt of 400
bags of sugar consigned by Riaz Sugar Factory)
• Debit: Cartage, Freight, etc. A/c Rs. 250
• Credit: Cash/Bank A/c Rs. 250 (Being the payment of cartage,
freight, etc.)
2. Upon receiving the advance against the consignment:
• Debit: Advance Against Consignment A/c Rs. 6,000
• Credit: Bank A/c Rs. 6,000 (Being the advance received from the
consignee, discounted at the bank at 5%)
3. Upon selling off the goods:
• Debit: Cash/Bank A/c Rs. 12,000
• Credit: Goods Consignment A/c Rs. 10,000 (Being the sale of
goods realizing Rs. 12,000)
• Debit: Charges A/c Rs. 80
• Debit: Commission A/c Rs. 600
• Credit: Riaz Sugar Factory A/c Rs. 10,680 (Being the deduction of
charges and commission, and the net amount payable to the
consignor)

Please note that the calculation for commission is Rs. 12,000 - Rs. 80 = Rs.
11,920, and 5% of Rs. 11,920 is Rs. 596, rounded up to Rs. 600.

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