Assignment No. 3 Chapter No.

3
Consignment Accounts
Act of sending goods from consignor to consignee to sale them on commission basis is called
consignment.
Account prepared to ascertain profit and loss of consignment is called consignment account.

Format of consignment Account:

Dr. Consignment Account Cr.

Details Rs Details Rs
All Expenses XXX Sales XXX
Unsold Stock (If Any) XXX
Abnormal loss ( If Any) XXX
Balance (Profit) Balance (Loss)
Total XXX XXX

MCQs:
Choose the appropriate Answer.

1. What is the manufacturer or whole seller who sends his goods for the purpose of sales
known as?
(a) Consignee (b) Consignor (c) Drawer (d) Agent.
2. The relationship between consignor and consignee is that of:
(a) Buyer and seller (c) Debtor and creditor
(b) Principal and agent (d) Endorser and endorsee
3. The remuneration of the consignee for selling of the goods of the consignor is called?
(a) Salary (b) Interest (c) Dividend (d) Commission.
4. In consignment all the expenses, either paid by the consignor himself or by the consignee
are borne by the:
(a) Consignor (b) Consignee (c) Bank (d) Special agent
5. Account sale is submitted by:
(a) Consignee to consignor (b) debtors to creditors (c) Principal to agent
(d) Creditors to Debtors.
6. In case of delcredre commission the liability for bad debts will be:
(a) Consignee (b) Consignor (c) Bank (d) Insurance company
7. Abnormal loss occurs due to:
(a) Fire (b) Accident (c) Theft (d) All of these(Board 2010,2013)
8. Delcredre commission is calculated on:
(a) Cash sales (b) Credit sales (c) Total sales (d) Cash and credit sales.
9. When goods are sent on consignment that is given to:
(a) Consignee’s a/c (b) Consignment a/c (c) Consignor’s a/c (d) sale’s a/c.
10. In the books of the consignee the expenses incurred by him on consignment are debited to:
 (a) Purchase a/c (b) Consignment a/c (c) Cash a/c (d) Consignor’s a/c.
11. In the books of the consignor the balance of the consignment stock a/c would be shown:
(a) As an assets in the balance sheet (b) As a liability in the balance sheet
(c) On the credit side of the trading a/c (d) On the debit side of P &Loss a/c.
12. It is paid to consignee if he takes the risk of bad debts
(a) Commission (b) Del credere Commission (c) over riding Commission (d)
None of these
13. It shows the detail about sale of goods, expenses paid by consignee etc
(b) Account Sale (b) Sales A/c (c) Consignor A/c (d) Sales book
14. How many parties are involve in Consignment
a) One b) Two c) Three d) Four
15. The Person to whom goods are sent is known as
a) Consignor b) Consignee c) Drawer d) Drawee
16. Consignee is
a) Principal b) Agent c) Creditor of consignor d) None of these
17. Consignee sells goods on behalf of
a) Drawer b) Drawee c) Consignor d) Agent
18. The remuneration of consignee for selling goods on behalf of consignor is
a) Salary b) interest c) Dividend d) Commission
19. In consignment the risk and damages attached to goods deliver is with
a) Consignor b) Consignee c) Buyer d) Seller
20. Normal loss is occurred due to
a) Leakage b) Loss in weight due to nature c) Accident d) “a” and “b”

Short Questions:
Define the following terms, each part should not exceed 5 to 6 lines.

1) What is consignment and it parties?

2) What is consignment inward and consignment outward?
3) Define Commission, Delcredre Commission, and Overriding commission
4) Differentiate between Normal loss and Abnormal Loss of Stock?
5) What is formula to calculate value of unsold stock?
6) Prepare account sales with imaginary data.
7) Write three Differences between Consignment and Sale?
8) What is Account Sale and Performa invoice?
9) What is consignment account / why it is prepared?
10) What is formula to calculate Adjusted per unit cost for normal loss?

Long Questions:
Q.1:
Rizwan sent 100 sewing machines to Aslam at Rs.650 per machine. Consignor paid charges
Rs.2000. Aslam accepted a bill for Rs.40,000. Aslam reported that 80 machines were sold for
Rs.875 each and freight Rs.3000, godown rent Rs.250 and insurance Rs.500 paid. Aslam’s
commission is 9% on sales. Due to insolvency of a costumer who purchases 4 machines failed to
pay anything.
You are required to pass prepare necessary ledgers.

Q.2:
Mohsin consigned to Ramzan 10,000 tons of coal at Rs.40 per ton and railway charges were
Rs.10 per ton. 5000 tons of coal sold @ Rs.80 per ton. Sales expenses Rs.4000, insurance Rs.
1000, and Commission 5% on sales. Consignee reported for shortage of 100 tons on the whole
consignment.
You are required to Pass Journal entries in the books of consignor and prepare
Consignment account.

Past Paper short Questions:

1. What is consignment inward and consignment outward? (2014)

2. Define Commission, Delcredre Commission, and Overriding commission (2017)
3. Prepare account sales with imaginary data. (2018)
4. Write three Differences between Consignment and Sale? (2016)
5. What is Account Sale and Performa invoice? (2019)
6. What is consignment account / why it is prepared? (2019)
7. What is formula to calculate Adjusted per unit cost for normal loss? (2015)

Past Paper long questions:

Q No.1(2015)
Rizwan of gujranwala sent 100 sewing machines to Aslam of Hong Kong at Rs.650 per machine.
The consignor paid Rs. 2000 for packing and dispatching charges. Aslam immediately after
receiving the consignment accepted a bill for Rs. 40,000. After some time Aslam reported that 80
machines were sold for Rs. 875 each and expenses being on freight Rs. 3000, on go down rent
Rs. 250, and on insurance Rs. 500. Aslam is entitled to a commission of 9% on sales. Due to
insolvency of a customer who purchased 4 machines failed to pay anything.
Show consignment account, Aslam account and goods sent on consignment account.
Q No.2 (2016)

A sends out a consignment of the value of Rs. 5000 to B drawing on the leter for Rs. 4000 as an
advance against the same. A also pays Rs. 450 for freight etc. B clears the goods paying Rs. 250
for duty, dock dues. etc. B sells on credit half the lot for Rs. 4000 and half of the remaining is
sold for cash Rs. 2200. B's Remuneration is 2.5 % on gross proceeds.
B sends out an account sales and a draft to A for the balance as shown there in. Rs. 1,250 worth
of goods are on hand with B.
Requirement: Open the necessary accounts in the books of A to record the above
transactions.

Q No.3 (2017)

M/s Kaleem Traders sent 100 machines to Habeeb on consignment. The cost of each machine
was Rs.12000. The expenses of M/s Kaleem traders were, Freight Rs.7000 and insurance
Rs.3000. During transit one machine was destroyed and the insurance company admitted
Rs.9000 towards that claim.
Habeeb sold 7 machines at Rs.15000 each and paid for storage and insurance Rs.3400. Habeeb
then accepted a bill for Rs.90,000 at 3 months drawn by M/s Kaleem traders, which they
discounted immediately with their bank at 6% p.a. It was agreed that Habeeb is to get 5%
commission.
Requirement: Give the consignment account in the books of MIS Kaleem Traders.

Q No.4 (2018)

On 1st January M/S A & Co. forwarded to M/S X & Co. a consignment of 25 chest of tea at Rs.
500 per chest. Paying Rs. 150 for freight on 18th March MIS A & Co received an account dated
20th February showing that 20 cases were realized Rs. 15,000 gross and the following expenses
have been incurred:
Octroi duty Rs. 100, storage and insurance Rs. 20, Delivery charges Rs. 150, commission 3%
and del credere commission 2%.
M/S X & Co. enclosed a bill at three months for the amount due.
Required: You are required to record the above transactions in the books of M/S A &
Co. and prepare a consignment and consignee account.
Past Paper long questions:

Q No.1(2015)
Rizwan of gujranwala sent 100 sewing machines to Aslam of Hong Kong at Rs.650 per machine.
The consignor paid Rs. 2000 for packing and dispatching charges. Aslam immediately after
receiving the consignment accepted a bill for Rs. 40,000. After some time Aslam reported that 80
machines were sold for Rs. 875 each and expenses being on freight Rs. 3000, on go down rent
Rs. 250, and on insurance Rs. 500. Aslam is entitled to a commission of 9% on sales. Due to
insolvency of a customer who purchased 4 machines failed to pay anything.
Show consignment account, Aslam account and goods sent on consignment account

Consignment a/c
Details Rs Details
Goods sent on con (100x650) 65000 Sales (80 x 875) 70000
Packing and dispatching 2000 Unsold stock (w) 14000
Freight 3000
Godown rent 250
Insurance 500
Commission 9% on sales 6300
Bad debts (4 x 875) (insolvent cus) 3500
Profit 3450
84000 84000

Calculation of unsold stock (w)

Unit unsold x unit cost
20 x 650 = 13000
Add: Direct exp/total unit x unsold unit
2000+3000 / 100 x 20 = 1000
Unsold stock = 14000
Q No.2 (2016)

A sends out a consignment of the value of Rs. 5000 to B drawing on the leter for Rs. 4000 as an
advance against the same. A also pays Rs. 450 for freight etc. B clears the goods paying Rs. 250
for duty, dock dues. etc. B sells on credit half the lot for Rs. 4000 and half of the remaining is
sold for cash Rs. 2200. B's Remuneration is 2.5 % on gross proceeds.
B sends out an account sales and a draft to A for the balance as shown there in. Rs. 1,250 worth
of goods are on hand with B.
Requirement: Open the necessary accounts in the books of A to record the above
transactions.
Consignment a/c
Details Rs Details
Goods sent on con 5000 Sales (4000+2200) 6200
Freight 450 Unsold stock (w) 1425
Dock dues 250
Commission 2.5% on sales 155
Profit 1770
7625 7625

Calculation of unsold stock (w)

Unit unsold x unit cost = Total cost
=1250
Add: Direct exp/total Cost x unsold cost
450+250/5000 x 1250 = 175
Unsold stock = 1425

Total goods =5000

Half of goods were sold =5000 x1/2 = 2500
Remaining goods = 2500
Half of remaining goods are sold for cash = 2500x1/2 =1250
Remaining goods / cost of unsold goods = 1250