CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment
Nair Brothers invoices goods to the consignee at ₹150 per unit against a cost of ₹120 per unit. 40 units are lost in transit through an abnormal cause. What amount, excluding any expenses, is finally charged to the Abnormal Loss account in the consignor's books?
The Abnormal Loss account is charged ₹4,800. Abnormal loss is shown at cost, not at invoice price, so the loading of ₹30 per unit on 40 units is removed from the invoice value of ₹6,000. That leaves 40 units at ₹120 each.
- A₹1,200
- B₹4,000
- C₹4,800Correct
- D₹6,000
Explanation
Consignment account is credited with the loss at invoice price, 40 × 150 = ₹6,000. The loading of 40 × 30 = ₹1,200 is then removed, so the loss is carried at cost: 40 × 120 = ₹4,800. ₹6,000 ignores the loading adjustment, and ₹1,200 is only the loading.
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
- Roy Enterprises consigns goods at cost plus 50%. Goods with an invoice price of ₹9,000 are lost abnormally in transit. At what amount should…
- Ganga Mills consigned goods to an agent at an invoice price of ₹1,25,000, which is cost plus 25%. At the year end, the unsold stock with the…
- Which of the following is an example of a normal loss on consignment that is NOT separately charged to the Consignment Account as a loss but…
- Which statement about an account sales is correct?
- In a consignment arrangement, who continues to own the goods while they are lying with the consignee?
- Kaveri Ltd invoices consignment goods at 20% above cost. At the year end, unsold stock with the consignee is valued at invoice price of ₹48,…