Accounting for Special Transactions

 Over- riding commission is the extra commission allowed by the consignor to the consignee to promote sales at a higher price then the specified or the fixed price.

 general trading a/c is credited with the cost of goods sent on consignment (without loading)
Thus,
General trading a/c will be debited with    =Rs (1000*100)
                                                                          =Rs 1,00,000

Profit for the Joint Venture = Rs{(2,50,000 + 10,000)-(2,00,000+2000+12500+10,000)}
                                                = Rs 25500
A's Share of profit                 = (3/5)*25,500
                                                 = Rs 15,300 

Rs 10,000 being the amount of goods stolen.

 A's Share of contribution = (3/5)*20,00,000
                                              = Rs 12,00,000

 Total Cost of goods       =400000
Cost of 4/5th goods        =320000
Sale Price                        =150% of 320,000
                                           =480,000
Commission on Sales   = 2% of 480,000
                                           = 9600
Net Profit for consignor  ={480,000-(320,000+9600)}

Cost of 2,000 kg apples        =Rs 6,000

• Freight                                  =Rs 400Total Cost of 2000 kg apples = Rs 6400
  Normal lossis to be spread over entire consignment for valuation of inventories
  Normal Loss                        = 15% of 2000
                                                 = 300 kgs
   therefore, Cost of 1700 kgs = Rs6400
  Cost per kg                             =Rs (6400/1700)
                                                   =Rs 4

 Consignor's expenses till the point stock reaches consignee is added to the cost of stock but expenses incurred after the goods have reached consignee's down are not to be added to the cost of stock.

Jornal Entry on account of abnormal Loss :
Profit and Loss a/c            Dr   5,000
       To Consignment a/c                      5,000

 When a bill is drawn 'after date', the term of the bill commences from the date of drawing the bill and when the bill is drawn aftersight, the term of the bill begins from the date of 'sighting', i.e. when the bill is accepted.

 Profit of the Joint Venture = Rs (250,000 + 10,000 - 200,000 - 2000 - 12,500)
                                           = Rs 45,500
Rs 2,000 being A's commission on purchase
and Rs 12,500 being B's commission on sale

A's share of profit = 3/5*45500 = Rs 27,300

 If a consignor provides Del-credere commission to the consignee, consignee will be held liabloe for all the losses due to non recovery of debts. In the absence of the same, consignor will be liable not the consignee.

Bills Payable is a liability, thus would have credit balance. The balance of bills payable account would be carried forward in the Bills Payable a/c in the next period.

 Consignor sends the proforma invoice to the consignee instead of actual invoice. The object of proforma invoice is only to convey information to the consignee regarding the particulars of the goods sent.

 When a Bill gets dishonored, holder of the bill pays the notory charges, but Notory charges are recovered from drawee.

Profit = (5,00,000+60,000+60,000)-(4,00,000+4,000+25,000+4,000+1,000+10,000+16,000)
          = Rs 160,000

This is a complex joint venture problem. X's effective cost: 4,00,000 - 20,000 (5% discount) + 4,000 (1% commission) = 3,84,000. Y receives: 5,00,000 (50% sales) - 25,000 (5% discount) - 4,000 (expenses paid) - 1,000 (expenses outstanding) - 16,000 (bad debts) - 25,000 (5% commission on sales) = 4,29,000. Y takes over 50% balance at 60% cost: 1,92,000 - 72,000 (40% discount) = 1,20,000. Fire loss on remaining 50%: 1,92,000 × 40% uninsured = 76,800. Final settlement: Y owes X the difference after all adjustments, resulting in Rs. 1,80,000 by Y to X.

 Its is mandatory to record transactions of goods sent on approval basis in Sales or Return Journal.

 When the goods are sent for approval basis, transaction is recorded in Sales or return Day book.

 Del credere Commission is paid by the consignor to the consignee to prevent himself against loss of bad debts. The consignment account maintained by the consignor will not get affected in case of bad debts, if del credere commssion is being paid to the consignee since consignee will be responsible for bad debts not consinor.

 When the goods are sent on Approval Basis, vaue of goods is recorded at cost.

Total amount recoverable from B's estate   =Rs (150,000+1500)
                                                                              =Rs 151,500
Amount recovered                                            =40% of 151500
                                                                             =60,600
Amount of deficiency to be written off           = Rs (151,500-60,600)
                                                                             = Rs 90,900

If the due date is a public holiday, the preceding business day would be the due date.

The party to whom amount is to be paid is known as Payee. Since X has endorsed the bill to Z who further endorsed it to W, amount would be finally be payable to W.

 60days from 24.11.2005          = 22.01.2006

• Grace Days                               =3
  Due date                                       =25.01.2006