Accounting Problems on Consignment

Consignment: Problem 1.

Raja Mills Ltd. of Ahmedabad sent 100 pieces shirting to Fancy Stores, Delhi, on
consignment basis. The consignees are entitled to receive 5 per cent commission plus
expenses. The cost to Raja Mills Ltd. is Rs 600 per piece.

Fancy Stores, Delhi, pay the following expenses:

Railway Freight, etc. Rs 1,000

Godown Rent and Insurance Rs 1,500

Raja Mills Ltd., draw on the consignees a draft for Rs 30,000 which is duly accepted. It

is discounted for Rs 28,650. Later Fancy Stores, Delhi, report that the entire

consignment has been sold for Rs 78,000. Show journal entries and the important

ledger accounts in the books of the consignor.

In the Books of Consignee:
Consignment: Problem 2.

1,000 toys consigned by Roy & Co. of Calcutta to T. Nu of Rangoon at an invoice cost of

Rs 150 each. Roy & Co. paid freight Rs 10,000 and insurance Rs 1,500. During the

voyage 100 toys were totally damaged by fire and had to be thrown overboard. T. Nu

took delivery of the remaining toys and paid Rs 14,400 as customs duty.

T. Nu sent a bank draft to Roy & Co. for Rs 50,000 as advance payment and later sent

an account sales showing that 800 toys had been sold at Rs 220 each. Expenses

incurred by T. Nu on godown rent and advertisement, etc., amounted to Rs 2,000 T. Nu

was entitled to commission of 5 per cent. One of the credit customers could not pay for

5 toys. Prepare the Consignment Account, T. Nu’s account and Profit and Loss Account

in the books of Roy & Co., assuming that nothing has been recovered from the insurers

due to a defect in the policy. T. Nu settled his account immediately.