Consignment Problem

Md. Sahriyar Alam Ratul. (23-24)

Department of Accounting & Information Systems.
Islamic University, Bangladesh

Abraham of Nagpur consigns 500 units of goods at a rate of $100 per unit to Suleman of
Mumbai. The expenses incurred by Abraham are as follows:
Loading and unloading charges:$600
Transit insurance:$200
Carriage:$300
Octrol duty:$400

Suleman pays the following expenses in respect of consignment:

Unloading:$400
Cartage:$275
Godown rent:$250

Suleman sells 300 units @ $180 per unit. 150 units remain unsold and 50 units are still in transit
at the end of the consignor's accounting year. Suleman's commission for this consignment is 20%
of gross sale proceeds realized by him.
No del credere commission is allowed.
Required: Compute the value of:
1. Stock in transit.
2. Unsold stock with consignee.
3. Total stock on consignment
Solution
i) Value of stock in transit:
Particular Tk Tk

Cost of goods in transit (50 units × $5,000

$100)
Add:Proportionate non-recurring
expenses paid by
consignor:[(S1,500/500)× 50) $150

Value of goods in transit $5150

We have not taken into account the consignee's non-recurring expenses in above computations
because the consignee has not yet received these units.

ii) value of unsold stock with consignee

Particular Tk Tk

Cost of unsold goods with consignee (150 units x $15000

$100)
Add:Proportionate non-recurring expenses paid
$450
by consignor:[(S1,500/500)× 150]
Add: Proportionate non-recurring expenses paid
by consignee:[($675/450*)× 150) $225

Value of unsold goods with consignee $15675

"The consignee has paid non-recuring expenses of $675 for 450 units (i.e., the units he has
actually received),
Units received by consignee = Units dispatched by consignor - Units still in transit
=500 units- 50 units
=450 units

iii) Total value of stock on consignment

Total stock on consignment = Value of unsold stock in consignee's godown + Value of stock in
transit
=$15,675+$5,150
=$20,825
CONSIGNMENT TO NAGPUR AC
Description Amount Description Amount

Goods sent on consignment $50,000 Suleman (sales) 300×180= $54000

Cash (expenses) Stock on consignment
●​ Loading & unloading $600 ●​ With consignee-$15675
●​ Transit insurance $200 ●​ In transit -$5150j
●​ Carriage $300 $20825
●​ Octori duty $400
Salesmen (expense)
●​ Unloading $400
●​ Cartage $275
●​ Godown rent $250
 Salesman Commission $10800
(300×180)×20%
Profit and loss on
consignment $11600

$74825 $74825

Problem 1:
A sends 200 cases of tea to B to be sold on a consignment basis. A spends Tk. 7,875 on packing.
The cost of each case is Tk14,250. B sends a bank draft as advance to A for Tk18,75,000. He
spends Tk33,750 on freight, Tk12,750 on sales men's salary and Tk17,250 as rent. B sells all the
sets @ Tk16,500 each. He is entitled to a commission of 10% on sales. He settled his account.

Prepare the Account sales and various ledger accounts in the books of both A&B.
Solution:

Date Particular Ref. Debit(tk) Credit(tk)

200 cases of tea sold @Tk16,500 each 33,00,000

Less:Expenses-
●​ Freight-33,750
●​ Salary-12,750
63750
●​ Rents-17,250
3,30,000
Commission @10% on sales 393750

Bills accepted already against consignment 29,06,250

Less: Bank draft as advance to A 18,75,000

Balance due/ Bank draft enclosed 10,31,250

Books of A (Consignor)
Journal
Date Particulars Ref. Debit(tk) Credit(tk)

Consignment A/c (200 @ Tk 14250) 28,50,000

Goods sent on consignment 28,50,000

Consignment A/c 7875

Bank A/c 7875
 Bank A/c 18,75,000
B’s A/c 18,75,000

B’s A/c 33,00,000

Consignment A/c (200 @Tk16500) 33,00,000

Consignment A/c 63,750

B’s A/c 63,750

Consignment A/c 3,30,000

B’s A/c 3,30,000

Bank A/c 10,31,250

B’s A/c (33,00,000-18,75,000-63,750-3,30,000) 10,31,250

Consignment A/c 48375

Profit & loss on consignment A/c 48375

Profit & loss on consignment A/c 48,375

Profit & loss A/c 48,375

Goods sent on consignment A/c 28,50,000

Trading A/c (transfer) 28,50,000
Ledger Accounts
i) Consignment to A’s Account in the books of consignor
Consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Goods sent on 28,50,000 B’s A/c (sales) 33,00,000

consignment

B’s A/c (expense) 63,750

B’s A/c (commission) 3,30,000

Cash expense 7875

Profit & loss 48,375

33,00,000 33,00,000
ii) Goods sent on consignment Account
 Goods sent on Consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Trading A/c 28,50,000 Consignment A/c 28,50,000

28,50,000 28,50,000
iii) B’s Account (consignee’s account)
B’s Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment A/c 33,00,000 Bank A/c 18,75,000

Consignment A/c (expense) 63,750
Consignment A/c (commission) 3,30,000
Bank A/c 10,31,250

33,00,000 33,00,000
iv) Profit & loss on consignment Account
Profit & loss Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Profit & loss on 48,375 Consignment profit A/c 48,375

consignment
v) Purchase Account
Purchase Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Goods sent on 28,50,000

consignment
iv) Profit & loss on consignment Account (Extract)
Profit & loss Account (Extract)
Dr Cr
Date Particulars Tk. Date Particulars Tk

Profit & loss on 48,375

Consignment A/c
 Books of B(Consignee)
Journal
Date Particulars Ref. Debit(tk) Credit(tk)

A’s A/c 18,75,000

Bank A/c 18,75,000

A’s A/c 63,750

Bank A/c 63,750

A’s A/c 3,30,000

Commission A/c 3,30,000

Bank A,s A/c 33,00,000

A’s A/c 33,00,000

Bank A/c 10,31,250

B’s A/c 10,31,250

Commission A/c 3,30,000

Profit & loss A/c 3,30,000
A’s Account in the book of B (consignor’s account)
A’s Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Bank A/c 18,75,000 Bank A/c 33,00,000

Bank A/c (expense) 63,750
Commission A/c 3,30,000
Bank A/c 10,31,250

33,00,000 33,00,000

Problem -02
V Mills Ltd. sent 100 pieces of suiting to L Garments House of Dhaka on consignment basis.
The consignees are entitled to receive 5 per cent commission plus expenses. The cost of V Mills
Ltd. is Tk200 per Suiting. L Garments House pays following expenses:
Railway Freight Tk500
Godown Rent & Insurance Tk1,000
V Mills Ltd draws on the consignees a bill for Tk10,000 which is duly accepted. Subsequently it
is discounted for Tk. 9,500. The consignees informed the consignor of the sale of the entire
consignment for Tk28,500.
Show ledger accounts in the book of the consignor.
Solution: Journal entries in the Bank of V Mills Ltd. (Consignor)

Date Particular Dr Cr

Consignment A/c 20,000

Goods sent on consignment A/c(100@200) 20,000

Bill receivable A/c 10,000

L Garment House A/c 10,000

Cash Account 9,500

Discount Account 500
Bill receivable A/c 10,000

L Garment House 28,500

Consignment 28,500

Consignment A/c 1500

L Garment House (500+1000) 1500

Consignment A/c 1425

L Garment House (28500÷100)×5 1425

Consignment A/c 5575

Profit & Loss A/c (28,500-20000-1500-1425) 5575

Bank A/c 15,575

L Germents A/c 15,575

Goods sent on consignment A/c 20,000

Trading A/c 20,000
Ledger Accounts
Consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Goods sent on 20,000 L. Garment House 28,500

consignment

L. Garment House 1500

L. Garment House 1425

Profit & loss 5575

28,500 28,500
 Goods sent on consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Trading 20000 Consignment 20000

L Germents House Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment (sales) 28,500 Bill receivable 10000

Consignment (expense) 1500
Consignment (commission) 1425
Bank A/c 15575

28,500 28,500
Profit & Loss Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Discount 500 Consignment 5575

Problem -03
Mr. Rashed of Dhaka consigned 1600 bags of cement to Mr. Raihan of Bogra on 1st may, 2021.
The cost of cement per bag was Tk400. Mr. Rashed paid Tk. 20000 as railway freight and 10000
carriage. During transit 100 bags of cement were totally damaged
due to the fault of the railway authority.
Mr. Rashed received Tk. 32000 from the railway authority as damages. Mr. Raihan sold 80% of
cement he received, for 600000 and paid the following expenses:
Carriage TK 7500
Rent of godown Tk 5000
Sales man'salary TK8000
Mr. Raihan is entitled to a commission of 7.5% on sales. He also reported that 5 bags of cement
were lost due to leakage. Show the necessary accounts in the books of the consignor.
Abnormal Loss
Cost of cement 100×400 40000
Add: Non-recurring paid by consignor
(30000÷1600)×100 1875
41875
Closing Stock
Cement sent 1600
Less: damage 100
Cement received 1500
Sold 80% 1200
Unsold 300
Normal loss 5
Closing stock unit 295bags

Value of the unsold stock:

Cost price (295×400) = 118000
Add: Proportion of non-recurring expense by consignee
(30,000÷1600)×295 5531
Add: Proportion of non-recurring expense by consignee
(7500÷1500)×295 1475
Value of unsold stock 125006
Books of Rased (Consignor)
Journal Entries
Date Particulars Ref. Debit(tk) Credit(tk)

Consignment A/c (200 @ Tk 400) 6,40,000

Goods sent on consignment 6,40,000

Consignment A/c 30,000

Bank A/c (20000+10000) 30,000

Abnormal loss A/c 41,875

Consignment A/c 41,875

Bank A/c 32,000

Profit & loss A/c 9,875
Abnormal loss A/c 41,875

Consignment A/c 20,500

Raihan A/c (7500+5000+8000) 20,500

Raihan A/c 6,00,000

Consignment A/c (sales) 6,00,000

Consignment A/c 45,000

Raihan A/c (commission) 45,000

Stock on consignment A/c 1,25,006

Consignment A/c 1,25,006
 Bank A/c 5,34,500
Raihan A/c (600000-20500-450000) 5,34,500

Consignment A/c 31,381

Profit & loss A/c 31,381

Goods sent on consignment A/c 6,40,000

Trading A/c (transfer) 6,40,000
Consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk
Goods sent on consignment 6,40,000 Abnormal loss A/c 41,875
Bank 30,000 Raihan A/c (sales) 6,00,000
Raihan A/c 20,500 Stock on consignment 1,25,006
Raihan A/c (commission) 45,000 A/c
Profit & loss A/c 31,381

7,66,881 7,66,881
Goods Sent on Consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Trading A/c 6,40,000 Consignment A/c 6,40,000

Raihan’s Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment A/c (sales) 6,00,000 Consignment A/c 20,500

Consignment A/c(Commission) 45,000
Bank A/c 5,34,500

6,00,000 6,00,000
Abnormal loss Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment A/c 41,875 Bank A/c 32,000

Profit & loss A/c 9,875

41,875 41,875
 Profit & loss Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment 31,381

Load Included in the following

Value of Opening stock
Stock Reserve A/C
Consignment A/c
Value of closing stock
Consignment A/c
Stock Reserve A/C
Value of goods sent
Goods sent on consignment A/C
Consignment A/C
Abnormal loss
Abnormal loss A/C
Consignment A/C

Problem 04:
On 10 June, 2017, B & Co. of Chittagong consigned 100 chests of tea to D & Co. of Dhaka. The
cost of the consignment amounted to Tk75,000 but the goods were charged at proforma invoice
price so as to show a profit of 25% on sales. On the same date the consignors paid Tk6,000 for
freight and insurance. On 1st July, the consignee paid Tk.10,000 for import duty Tk.2,000 for
Dock Dues and remitted a Bank draft for Tk.40,000 as an advance against the consignment. On
15th July,they sold 80 chests for Tk1,05,000. D& Co. is entitled to a commission of 5% on gross
proceeds of sales.

Show the Ledger Account in the books of both the consignor and the consignee.

Date Particular Dr Cr

Consignment A/c 1,00,000

Goods sent on consignment A/c 1,00,000

Consignment A/c 6,000

Cash A/c 6,000

Consignment A/c 12,000

D & co. A/c (expense) 12,000
 Bank draft A/c 40,000
D & co. A/c 40,000

D & Co. A/c 1,05,000

Consignment (Sales) 1,05,000

Consignment A/c 5,250

D & co. A/c (commission) 5,250

Stock on consignment A/c 23,600

Consignment A/c (20000+1200+2400) 23,600

Consignment A/c 5000

Stock Reserve A/c(25000/100)*20 5000

Bank A/c 47,750

D & co. 47,750

Consignment A/c 25,350

Profit & loss A/c 25,350

Goods sent on consignment A/c 25,000

Consignment A/c 25,000

Goods sent on consignment A/c 75,000

Trading A/c 75,000

Ledger Accounts
Consignment Account
Dr Cr
Date Particulars Tk Date Particulars Tk

Goods sent on consignment 100,000 Goods sent on consignment 25,000

Freight & insurance 6000 Sold 1,05,000

Import duty 10,000 Closing stock 23,600

Dock dues 2000

Commission 5% 5250

Stock reserve 5000

Profit 25350

153,600 1,53,600
 Goods sent consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment A/c 75,000 Consignment A/c 1,00,000

Trading A/c 25,000

1,00,000 1,00,000
D& Co. Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment A/c 1,05,000 Consignment A/c(expense) 12,000

Bank over draft A/c 40,000
Consignment(commission) 5,250
Bank A/c 47,750

1,05,000 1,05,000
Profit & loss Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment 25,350

Closing stock:
(100,000/100)*20= 20,000
+(6000/100)*20= 1200
+(12000/100)*20= 2400
23,600
Stock Reserve
(25000/100)*20= 5000
Journal Entry
Books of Consignee
Date Particular Dr Cr

B& Co. A/c 12,000

Bank A/c 12,000

B& Co. A/c 40,000

Bank A/c 40,000
 Bank A/c 1,05,000
B& Co. A/c 1,05,000

B& Co. A/c 5,250

Commission A/c 5,250

B& Co. A/c 47,750

Bank A/c 47,750
Ledger Account
Books of D& Co. Account
B& Co. Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Bank A/c (Expense) 12,000 Bank 1,05,000

Bank A/c (over draft) 40,000
Commission A/c 5,250
Bank 47,750

1,05,000 1,05,000
Problem 05:
A of Dhaka sent consignment goods to his agent,S of Chittagong at an invoice price of
Tk30,000. This was made by adding 25% on the cost and the consignment was originally debited
with the invoice price of Tk.30,000.A paid thereon Tk.750 for rail way freight,Tk.200 for cartage
and Tk.500 for insurance.S sold half of the goods for Tk.18,000 incurring bad debt of Tk.4,000
and paid landing charges Tk.200 and selling expenses Tk.350. The Agents are entitled to a
commission of 5% of the gross sale proceeds with further 2% as Del Credere Commission. One
fourth of the consignment was lost by fire and a sum of Tk.5,500 was recovered from the
insurance company. Draw up
●​ Consignment Account
●​ Goods sent on consignment A/C in the books of A assuming the closing stock to be one
fourth of consignment.A two months' bill was received from S in settlement of account.
In the book of Consignor
Journal Entry
Date Particular Dr Cr

Consignment A/c 30,000

Goods sent on consignment A/c 30,000

Consignment A/c 1450

Cash A/c (750+200+500) 1450
 S’s A/c 18,000
Consignment A/c 18,000

Consignment A/c 550

S’s A/c (Expense) 550

Consignment A/c 1260

S’s A/c (18000*7%) 1260

Abnormal loss A/c 6,363

Consignment A/c(24000+1450)*0.25 6,363

Bank A/c 5500

Profit &loss 863
Abnormal Loss A/c 6363

Stock on consignment (30000+1450+200)*0.25 7,913

Consignment A/c 7,913

Consignment A/c 1500

Stock reserve 1500

Bill receivable 16,190

S’s A/c 16,190

Consignment A/c 3516

Profit & loss A/c 3516

Goods sent on consignment A/c 6000

Consignment A/c 6000

Goods sent on consignment A/c 24,000

Trading A/c 24,000
Consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk
Goods sent on consignment 30,000 S’s A/c 18,000
Cash A/c 1450 Abnormal loss A/c 6,363
S’s A/c (Expense) 550 Stock on consignment 7,913
S’s A/c (Commission) 1260 Consignment A/c 6000
Stock reserve A/c 1500
Profit & loss A/c 3516

38,276 38,276
 Goods sent consignment Account
Dr Cr
Date Particulars Tk. Date Particulars Tk

Consignment A/c 6,000 Consignment A/c 30,000

Trading A/c 24,000

30,000 30,000

2024
4. a) Give the meaning and examples for non-recurring expenses in consignment accounts.03

b) If a consignment remains partly unsold stock at the time of balancing the books, how do you
deal with it?02

c) Alam consigned to Belal 5,000 kg of tea costing Tk. 40 per kg. Alam incurred Tk. 3,000 on
freight and Tk. 2,000 on insurance. 500 kg of tea were lost in transit. The insurance company
admitted the claim for Tk. 15,000. After receiving the goods. Belal spent Tk. 1,000 on carriage.
Tk. 500 on selling and Tk. 500 on godown rent, Belal was allowed a commission of 5% on sales.
3,000 kg of tea were sold at Tk. 64 per kg. 25 kg of tea were lost due to breakage of a chest
which was considered to be normal.

Instructions:09
1) Prepare necessary Ledger Accounts in the books of Alam and Belal.

ii) Will your answer be different if, in the above case. abnormal loss of 500 kg took place in the
consignee's godown by theft---other things remaining the same?

2023
4. a) What is a Consignment Account? Distinguish between sale and consignment.03

b) What is the del credere commission? Why is it given to the consignee?02

c) Pradip of Chottogram consigned goods costing Tk. 45,000 to Qashem of Dhaka. The invoice
was made so as to show a profit of 33%% on cost. Pradip paid Tk. 300 as carriage and Tk. 1,200
as freight and insurance. Goods costing Tk. 5,000 were destroyed in transit and the insurance
company admitted the full claim.

In Dhaka Qashem paid Tk. 240 as carriage and Tk. 600 as godown rent. Two-thirds of the goods
received by Qashem were sold by him. Qashem sent a cheque to Pradip for the sale proceeds
after deducting the expenses incurred by him and the commission due to him ordinary 5% and
del credere 2.5%.

Instructions:
Show the Consignment Account and Qashem Account in the books of Pradip.09

2022
a) State the meaning of consignment.01

b) Explain the accounting treatment of consignment transactions.03

c) On 10th June, 2021, B & Co. of Chittagong consigned 100 chests of tea to D & Co. of Dhaka.
The cost of the consignment amounted to Tk. 1,50,000 but the goods were charged at proforma
invoice price so as to show a profit of 25% on sales. On the same date the consignors paid Tk.
12,000 for freight and insurance. On 1" July, the consignee paid Tk. 20,000 for import duty Tk.
4,000 for dock dues and remitted a bank draft for 17 80,000 as an advance against the
consignment. On 15th July, they sold 80 chests for Tk.2,10,000. D & Co. is entitled to a
commission of 5% on gross proceeds of sales.

Required:
Prepare the Ledger Account in the books of both the consignor and the consignee.08

Tutorial Exam
a) What do you mean by consignment business? Discuss the difference between consignment
and sale. 3

b) Alpha Itd. of Dhaka consigned goods costing Tk. 1, 60,000 to Beta Itd. of Khulna. The terms
of the consignment were:

(a) Consignee to get commission of 5% on cash sales and 4% on credit sales.

(b) Any goods taken by the consignee himself or goods lost through consignee's negligence shall
be valued at cost plus 12.50% and no commission will be allowed on them.07

The expenses incurred by the consignor were:

Carriage and freight Tk-6,720 and Insurance Tk- 3,440. The consignor received . Tk.50,000 as
an advance against the consignment. An account sale together with a draft for the balance due
was received by the consignor showing the following position:
Goods costing Tk- 1, 28,000 were sold for cash at Tk-1, 40.000 and on credit at Tk. 1,08,000.
Goods costing Tk- 8,000 were taken by Beta Ltd. and goods costing Tk. 4,000, were lost through
Beta's negligence. The expenses incurred by Beta Ltd. where: Advertisement Tk-1,720: other
selling expenses Tk- 1,080.

Open Consignment Account and Beta Ltd. Account in the books of Alpha Ltd. Account.