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Consignment Account Problem 1 - Financial Accounting - By Saheb Academy - YouTube
Channel: Saheb Academy
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Hi guys in the last video we have seen
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the introduction of consignment accounts
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okay
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now in this video we are going to solve
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a problem on consignment okay
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here it is said that Mahesh of Mumbai
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consigned goods of the cost of rupees
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20,000 to Balaram of Bangalore okay so
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Mahesh has sent goods to Balaram of
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costing rupees 20,000
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okay so Mahesh is the consignor and
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balaram is the consignee
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okay then it is said the consignor pays
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freight of Rs.1000 and insurance
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of Rs.500 okay
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so Mahesh has incurred some expenses
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to send the goods to the consignee okay
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and received an advance of Rs.10,000
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by cheque from Balaram
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okay so Balaram has paid an advance to
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Mahesh of 10,000 okay alright then it is
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said the consignee paid carriage of
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Rs.300 and octroi of the Rs.200
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okay so Balaram also has incurred some
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expenses to receive the goods okay then
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it is said he sold all the goods for Rs.30,000
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Rs.30,000 and sent an account sales okay so
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he sold the goods he sold all the goods
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okay and sent an account sales
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Accounts sales it is a statement containing all the
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information of what Consignee did
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how much goods he received okay how much he
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he sold and how much commission he
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charged etc. etc.
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all right okay then it is said he also
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sent a cheque to Mahesh for the amount
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due after deducting his expenses along
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with the Commission at 10 % on
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the gross sale proceeds okay so he sent a
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cheque to Mahesh all the money which he
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received that is 30,000 he sent
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a cheque to Mahesh
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after deducting his expenses so all the
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expenses of Consignee
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is bear by Mahesh okay then along with
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the Commission
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10% that means consignee is
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getting a commission of 10%
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on the gross sale proceeds okay ten
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10% on 30,000 okay that
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is the sales okay then it is said
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prepare the necessary ledger account in
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the books of Mahesh the consignor okay
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so we'll prepare three accounts first
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one would be Consignment a/c and the
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second one would be the Consignee a/c
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account and the third would be Good sent
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on consignment a/c okay
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it is very easy okay I will show you how
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to prepare all those three accounts okay
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okay okay now we'll prepare all the
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accounts in the books of Mahesh okay
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that is the consignor okay all right now
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consignment account consignment account
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is similar to Trading & P/L a/c
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okay
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in consignment account we record
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expenses on debit side okay and revenues
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revenues on credit side okay so consignment
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account is prepared to find out profit
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or loss made by the consignment okay so
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in this question first
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it is said that Ramesh send the goods to
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Balaram okay so he had to purchase this
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goods before sending it on consignment
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okay so that purchase is an expense for
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Mahesh okay so expense we record it on
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the debit side of consignment account
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okay so here we will write this 20,000
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okay 20,000 and we will write here ''To goods
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"To goods sent on consignment" okay
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to good sent on consignment okay next it
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is given here the Ramesh has incurred
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some expenses to send the goods okay
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like freight and insurance of 1,000 and
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500 so this is also an expense
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for Mahesh okay so these expenses will
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also come on the debit side okay but
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here we will write here "To cash" okay we
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will NOT write To Freight or To Insurance
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because in consignment account we need
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to prepare limited number of accounts
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okay we need to prepare limited number
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of accounts so to prepare limited number
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of accounts we have to take here to cash
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okay and here under we will write
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freight and insurance okay that is 1,000
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and 500 equal to 1500 okay next
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here it is said that Balaram the
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Consignee has also incurred some
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expenses such as carriage of 300 and of
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Otroi of 200 okay so these expenses
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will also come on the the debit side okay
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"To Balaram" here we will write as "To Balaram"
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and NOT To Cash okay because Balaram
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is the person who incurs those expenses
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okay carriage of 300 and Octroi of 200
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okay equal to 500 okay now it is said
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Balaram sold all the goods for 30,000
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30,000 okay so this is Sales so sales
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is it an expense or a revenue of course
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it is a revenue okay so all the revenues
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will come on the credit side okay so we
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will write here 30,000 okay and
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here we will write "By Balaram" because
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Balaram is the person who sold all the
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goods
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okay sales okay now next here it is said
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that commission on sales
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that means Balaram is entitled to a
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commission of 10% on sales
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Commission is an expense for Ramesh
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okay because Ramesh has to pay the
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Commission to Balaram
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so that expense will come on the debit
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side okay and it will come as "To Balaram"
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okay
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commission it is said Commission of 10
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percentage Commission on sale 30,000
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okay so 10 percentage on 30,000 is equal
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to 3000 okay easy right
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okay now we will balance this account
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and find out the balancing figures
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okay so credit side is bigger than debit
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side okay so we will write this 30,000
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on both sides 30,000 30,000 okay then
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we'll subtract all this with 30,000 okay
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and it will give us the balancing figure
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that is 5000 okay "To Profit and Loss" the
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profit will be transferred to profit and
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loss account okay easy right oh okay
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after preparing the consignment account
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we need to prepare The Consignee A/c
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okay and this account is prepared to
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find out the amount due from the
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consignee okay amount due from the
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consignee okay all right so to prepare
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this account first you need to see the
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consignment account okay you have to see
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where the consignee name appears on the
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consignment account okay if it appears
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on the debit side then you have to
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credit it in the consignee account okay
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and if it appears on the credit side
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then you have to debit it in the
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consignee account
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okay so here Balaram has appeared here
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on the debit side of consignment account
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so we will credit it over here as by
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By Consignment okay
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By Consignment equal to 500
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similarly it has appeared here also To
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Balaram so here it is debited then here
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it will be here we will credit it ok
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By Consignment 3000 rupees
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okay now Balaram name has also appeared
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on the credit side of consignment
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account okay
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so we will debit it in the consignee
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accounts by consignment as by
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consignment
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okay By Consignment 30,000 all right
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oh then it is said in the question that
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Balaram has paid an advance to Ramesh of
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10,000 okay so that advance we will
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record it on the credit side of consignee
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account as "By Bank" okay
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"By Bank" 10,000 okay it is given in the
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question. okay then we will balance this
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account and find out the amount due
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from the consignee okay so debit side
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is bigger than the credit side okay so
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we'll write 30,000 on both the sides okay
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30,000 30,000 then we will subtract all
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these with up 30,000 and it is equal to
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16,500 okay and
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it will be the balancing figure and
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we'll write By Bank okay is a balancing
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figure okay easy right
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okay
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okay after preparing the Consignment A/c
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and then the Consignee A/c we
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need to prepare Goods Sent on
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Consignment A/c okay so to prepare
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this account you need to see the
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Consignment A/c okay
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and see where the goods sent on
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consignment appears in the consignment
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account okay
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in this problem it appears on the debit
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side okay so we will credit it over here
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okay as "By Consignment" okay
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By Consignment 20,000 okay and we will
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balance this directly ok we'll balance
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this will balance this account and here
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we will write "To Trading A/c" okay we
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will transfer this balance to trading
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account okay this is the balancing figure
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easy right okay
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okay at first we prepared the
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consignment account in the books of
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Mahesh okay and this account is prepared
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to find out the profit or loss made by
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the consignment okay and in this account
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all the expenses are recorded on the
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debit side and all the revenues on the
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credit side okay and we debited this too
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"Goods Sent on Consignment" because this
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was a expense for the
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consignor okay and similarly these
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expenses we recorded it as "To Cash" because
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in consignment we always record expenses
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of Consignor as "To Cash" okay similarly
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the consignee has also incurred some
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expenses so we recorded his expenses by
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his name as "To Balaram" okay then we
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recorded his commission the commission
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of Consignee "To Balaram" as 3,000 okay
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then Balaram has Sold all the goods so
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we recorded here on the credit side
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because Sales is a revenue so we always
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record revenue on the credit side okay
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so we credited "By Balaram" 30,000
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because balarama was the person who sold
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all the goods okay okay then the balanced
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is account and found out the profit as
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5000 okay
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easy right okay okay after preparing the
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Consignment A/c we prepared
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the Consignee A/c okay and this account
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is prepared to find out the amount due
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from the consignment okay so to prepare
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this account first we saw the
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consignment a/c okay and whatever
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was credited over here by the name of
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consignee we debited it over here by
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the name of consignment okay and
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whatever was debited over here by the
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name of consignee we credited it over
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here by the name of consignment okay
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then we credited the bank advance the
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advance that was paid from the
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consignee to the consignor okay and
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then as a balance figure we found out
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then as a balance in figure we found out
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as amount due as 16,500
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okay easy right okay okay after
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preparing The Consignment A/c and
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then The Consigning A/c we prepared
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Goods Sent on Consignment A/c okay
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and this To goods sent on consignment
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we credited it as By Consignment okay
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then we balanced this account and found
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out the balancing figure as 20,000
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20,00 okay and we transferred this
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balance to trading accounts okay
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easy right Okay.
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