CMA Intermediate · Financial Accounting · Consignment
Kapoor Ltd. consigned 500 units costing Rs 200 each to Sen Brothers. The consignor paid Rs 10,000 freight and insurance. On the way, 50 units were destroyed by an abnormal cause (an accident). What amount is credited to the Consignment Account for the abnormal loss?
The Consignment Account is credited by Rs 11,000. The 50 destroyed units cost Rs 10,000 and carry a tenth of the Rs 10,000 freight and insurance, which is Rs 1,000. Abnormal loss includes proportionate expenses incurred up to the point of loss.
- ARs 10,000
- BRs 10,500
- CRs 11,000Correct
- DRs 9,000
Explanation
Cost of 50 units = 50 x 200 = Rs 10,000. Proportionate expenses = 10,000 x 50/500 = Rs 1,000. Abnormal loss = Rs 11,000, credited to Consignment Account and debited to the Abnormal Loss Account. Rs 10,000 omits the expenses.
Did you get it right without looking?
One question tells you little. A timed set on Consignment shows your real accuracy, how long you take and where you lose marks.
More Consignment questions
- A consignor sends goods to a consignee on an agreed commission of 5% on sales plus a del credere commission of 2% on sales. What is the main…
- In consignment accounts, how is a normal loss (such as evaporation or shrinkage inherent in the nature of goods) treated when valuing the co…
- A consignor sent 1,000 units at cost Rs 60 each, with freight of Rs 5,000 paid by him. Of the units sent, 100 were lost in transit due to a …
- Which statement about the Proforma Invoice sent by the consignor to the consignee is correct?
- Verma Industries consigned goods invoiced at 25% above cost. The goods sent were Rs 3,75,000 at invoice price. What was the cost of the good…
- Mehra Ltd. consigned 200 units costing Rs 500 each to Nair & Co., and paid Rs 10,000 freight. Nair sold 150 units at Rs 700 each, and paid R…