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CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment

Sharma Traders consigned 400 units costing Rs 150 each to Verma & Co. Sharma paid freight of Rs 4,000 and insurance of Rs 2,000. Verma paid Rs 3,000 as godown rent. What is the total amount debited to the Consignment Account for these items?

The Consignment Account is debited with Rs 69,000. This is goods at cost of Rs 60,000, plus freight Rs 4,000 and insurance Rs 2,000 paid by the consignor, plus Rs 3,000 godown rent paid by the consignee, since all are consignment expenses.

  1. ARs 69,000Correct
  2. BRs 66,000
  3. CRs 63,000
  4. DRs 60,000

Explanation

Cost of goods = 400 x 150 = 60,000. Add consignor's freight 4,000 and insurance 2,000 = 66,000. Add consignee's godown rent 3,000 = 69,000. Rs 66,000 is wrong because it omits the consignee's expense, which is also debited to Consignment Account.

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