BOOK KEEPING FORM FOUR – CONSIGNMENT ACCOUNT

FINAL COMPLETION OF CONSIGNMENT

When the remainder of the consignment sold the consignment account can be closed. This will be done by transferring the final portion of profit & loss to the consignor p&l  A/C. The detail will be found on the final account sales which the consignor a/c will have sent to the consignment.

From the above example as follows:-

vii) The final 20 cases where sold for 3,800 each

viii) Selling cost for those two (2) cases were Tshs 7,000

ix) Commission deducted of 10% on sales

Solution;-

DR       CONSIGNMENT TO MOHAMED A/C           DR

EXERCISE

On 8^th Feb. 2012, P.J of London trader consigned 120 cases of goods to M.B on agent in New zeland. The cost of the goods was sh 250 a case, P.J paid carriage to the port 14,700 and insurance 9,500.
On 31^st March 2012, P.J  receive  an account sales from M.B showing that 100 cases had been sold for sh 350,000 and M.B Had been paid freight at the rate of sh 200 a case and port charge amounting to shs 18,600. M.B was entitled to a commission of 5% of sales.

A sight draft for the net amount due was endorsed with an account sale.

Req:-

You are required to show the account for the above transaction in the ledger of P.J and to show the transfer to P&L at 31^st March 12.

BILLS DRAWN AGAINST CONSIGNMENT

The consignee may divide to remit the next proceeds by a bill of exchange instead of cash remittance.

In this case the consignor.

DR: Bills receivable a/c

CR: Consignee a/c

with amount of bill.

DR: Cash book

CR: Bills receivable A/C

           When the bill is paid

EXAMPLE:

Ponda of Dar es salaam consigned to Saleh of Nairobi goods for the value of 150,000. Ponda paid 5,000 for freight and 1,000 for insurance; he drew a bill of exchange for 40,000 on Saleh as an advance which was duly accepted by Saleh. Ponda discounting the bill for 39,500.

4/5 the goods were sold by Saleh for 160,000,

His expense was 3,500 and commission 3,200, Saleh forward a draft for a balance.

Required:

-Show the ledger in the books of Ponda (consignor)

Solution:

                 DR                   CONSIGNMENT TO SALEH A/C                          CR

 

EXERCISE (BILLS DRAWN AGAINST CONSIGNMENT)

TUMAINI of   Japan   consignment   goods costing   70,000/= to his agents   Hamisi of Singida   Tanzania he drew  on his agents   a three   month bill   of exchange   for   20,000/= against   the consignment   and   discounted   it upon   acceptance   for   Tshs 19000/=

           Tumaini   paid   following   expenses

−        Marine   insurance   ……….. 3000/=

−        Carriage from   Dar   to Singida ………. 5600/=

−        Port   charges …………………………………1800/=

           Hamisi   incurred   the   following   cost

−        Loading   charges ………….. 4800/=

−        Carriage ………………………….6800/=

−        Port   and   other   expenses …1600/=

          Half   of the consignment   was sold   and the   following  

          Selling   expenses were   incurred …. 1400/=

−        Agents commission   was 10%   plus 2%   del-credere   commission   on   gross     proceed   which   amounted   shs 295000/=

Show   ledger   account   in the   book   of Tumain   all   calculation     must   clearly   be   shown   account   sale   is not necessary