CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment
In consignment accounts, the closing stock lying unsold with the consignee is valued at which of the following?
Unsold consignment stock is valued at cost plus proportionate direct expenses incurred up to the consignee's godown, or at net realisable value if that is lower. Profit must not be anticipated, so selling price is not used, and selling expenses are excluded from the stock value.
- ASelling price less consignee's commission
- BCost price plus a proportionate share of non-recurring expenses
- CCost price plus proportionate direct expenses incurred up to the consignee's godown, or net realisable value if lowerCorrect
- DInvoice price of the goods including the consignor's loading
Explanation
Unsold stock on consignment is valued at the lower of cost and net realisable value. Cost includes the invoice cost of goods plus the proportionate direct expenses such as freight and insurance up to the consignee's godown. Selling price based values would recognise profit before sale, which is not allowed.
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