Consignment
1
Consignment would involve:
a. Sale of goods between principal and agent b. Partnership business between parties
c. Transfer of goods to agent by principal. d. Accommodation of bill
c. Transfer of goods to consignee to be sold on behalf of consignor.
2.
Goods sent on consignment are recorded at a. Cost price
b. Invoice price c. Selling price
d. Catalogue price
b. Invoice price. Document accompanying the goods are normally
sent at invoice price.
3.
Loading on goods sent on consignment is the difference between:
a. Selling price and cost price
b. Invoice price and selling price c. Invoice price and cost price
d. Credit price and cash price
c. Difference between invoice price and cost price is termed as loading
4.
Majority of non-recurring expenses are normally incurred by
a. Consignor
b. Customer c. Carrier
d. Consignee
a. Consignor is the initiator incurs
majority of the non
recurring expenses.
5.
Consignee is entitled for a. Salary
b. Expenses
c. Commission on sales d. Profit
c. commission is the source of income for
consignee.
6.
Consignee is
a. Agent of consignor b. Partner of consignor c. Principal of consignor
d. Employee of consignor
a. Agency principal relationship is
prevailing.
7.
Consignee can claim
a. For expenses on consignment
b. For commission on sales effected c. Either a or b
d. He is entitled for the commission and expenses on consignment
d. Both a & b
8.
Goods lost in transit shall be accounted only at a. Cost price (including expenses)
b. Invoice price (including expenses) c. Selling price (excluding expenses) d. Net realizable value
a. Cost price is the base at which goods
lost in transit shall be accounted.
9.
To make consignee sell the goods sent on consignment, consignor shall
a. Fix higher rate of commission b. Fix del credere commission
c. Allow consignee to participate in profits d. Demand advance money in cash or Bills
d. Demanding advance money
means consignee though not taking risk, effectively
investing
money/moneys worth. This will result in he taking all possible steps to sell
10.
Loading is required for
a. Goods sent on consignment
b. Closing stock lying at consignee’s place c. Goods returned by consignee
d. All of the above
d. All the items referred shall qualify for removal of load.
11.
Non-recurring expenses incurred by consignor are loaded on
a. All units sold by consignee b. All units sent by consignor
c. All units unsold by consignee
d. All units sent except damaged/lost
b. All units sent by consignor irrespective of their ultimate disposition.
12
Del credere commission is calculated on a. Total sales effected by consignee b. Credit sales effected by consignee
c. Cash sales effected by consignee
d. Total sales – Sales returns effected by c’nee
d. Total sales
effected by consignee as reduced by returns if any.
13
Over riding commission is the commission on a. Additional commission on cash sales
b. Additional commission on credit sales
c. Extra revenue over normal sales d. None of the above
c. For extra efforts put in by the
consignee, an award
14
NRV of the unsold stock is arrived at by
c. Net realizable
a. Multiplying the selling price and the unsold stock
b. Calculating the future commission payable
c. a-b d. a+b
value is the difference between
normal sale value
and the expenses to be incurred to realize the sale value.
15.
Consignment account is a. Nominal account
b. Real account
c. Personal account
d. Memorandum account
a. Nominal account. Prepared to find out
profit/loss on consignment
16.
Goods sent on consignment account is a a. Personal account
b. Real account
c. Nominal account
d. Impersonal account
b. Real account. This reflects the stock
sent out of normal business for consignment
purposes
17
Consignee’s personal account is prepared to find out
a. Profit or loss on consignment account b. Sums due to or due from consignee
c. Commission payable to consignee
d. Appropriation of profit with consignee
b. To find the outstanding position with consignee
18.
Insurance claim against abnormal loss account shall be transferred to
a. Consignment account
b. Profit and loss account
c. Goods sent on consignment account d. Consignee’s personal account
b. Profit and loss account to which the
difference between
the cost and the claim will be transferred.
19.
Consignee records all except
a. Recurring expenses incurred by consignee b. Non recurring expenses incurred by
consignee
c. Commission eligible for sales
d. Unsold stock held by consignee
d. Consignee records all transactions
pertaining to him except the closing stock held by
consignee
20.
The document sent detailing the sales effected, unsold stock, expenses incurred by consignee is
a. Pro-forma invoice
c. Account sales is the name of the document sent by
b. Current account c. Account sales
d. Sales account
consignee periodically
21.
Bad debts incurred by consignee, so he will not transfer the burden to consignor when he is paid
a. Commission
b. Over riding commission c. Del credere commission d. Commission on profit
c. Del credere commission is paid by consignor to absorb the risk of bad debts.
22.
The balancing figure in goods sent on consignment account of a trader consignor is to
be transferred to
a. Purchases or trading account b. Manufacturing account
c. Profit and loss account
d. Retained as closing stock
a. Purchases or trading account
23.
The following are part of non-recurring expenses:
a. Freight
b. Insurance c. Cartage
d. All the above
d. As part of the non- recurring expenses all expenses incurred specifically for the
consignment shall be
taken for stock valuation purposes.
24.
Goods loss in transit cannot be recovered from the insurance company as consignee had taken
del credere commission: Is it correct?
a. Incorrect b. Correct
c. Sometimes correct d. None of the above
a. It is incorrect. Del credere commission
and claim on account
of goods lost in transit have no connection at all.
25.
When goods are sent on consignment, consignment account shall be debited and credit shall be offered to
a. Consignee’s account b. Purchases account
c. Goods sent on consignment account d. Capital account of consignor
c. Goods sent on consignment account shall be credited for the movement of
material
26.
While recording the transaction in the form of
a. True. In either
journal entry, there is no difference between cash sales and credit sales in the books of consignor.
a. True
b. False
c. Not relevant d. Partly true
case, consignee’s account will be
debited with
corresponding credit to consignment account.
27.
Removal of loading on opening stock shall be debited to consignment account.
a. True b. False
c. Not relevant d. Partly true
b. False. Since opening stock
appears on the debit side, loading is to be carried out on the
credit side.
28.
Removal of loading on closing stock shall be debited to consignment account.
a. True b. False
c. Not relevant
d. Partly true
a. It is true. As the closing stock appears on the credit side of consignment account,
removal of load is to
be shown on debit.
29.
Freight expenses incurred by the consignee for returning goods to consignor shall be added as
non-recurring expenses for valuing closing stock.
a. Correct
b. Incorrect
c. Partially correct
d. None of the above
b. Incorrect. Such freight expenses have
no connection to the
unsold stock.
30.
In case consignee participates in the profit, expenses incurred in the return of unsuitable goods to consignor shall not be considered in the computation of profit entitlement
a. It is correct for consignment
b. It is correct for consignee
c. It is incorrect for consignor d. It is incorrect in accounting
b. It is correct for consignee’s entitlement of profit share. Cost of
returning goods is
purely the cost of faculty/unsuitable item sent by consignor not to be burdened for consignee’s profit share
31.
In case consignee participates in the profit,
d. Expenses incurred
expenses incurred in the return of unsuitable goods to consignor shall not be considered in the
computation of profit on consignment
a. It is correct for consignment b. It is correct for consignee
c. It is incorrect for consignor d. It is incorrect in accounting
in consignment can never be ignored
whatsoever. It is bad
in accounting.
32
Irrecoverable debts in consignee’s books shall be a. Debited to bad debts account
b. Debited to Profit & Loss account c. Debited to consignor’s account
d. Debited to Provision for bad and doubtful
debts account
c. Consignors account shall be debited in case of non-recovery of debts when no del
credere commission
is paid.
33
Irrecoverable debts in consignee’s books shall be a. Debited to consignor’s account
b. Debited to del credere commission account c. Debited to bad debts account
d. Either a or b
d. Consignors account in case no del credere
commission is taken
or else del credere account
34
Treatment for normal loss in the valuation of closing stock is
a. Ignore it b. Insure it c. Include it d. Inflate it
a. Ignore it in the computation of
closing stock value. However quantitatively the same shall be
deducted
35
Abnormal loss is
a. Excessive loss b. Accidental loss
c. Damage resulting into obsolete d. All of the above
d. Abnormal loss takes into account all these issues
36
When the details of expenses met out by consignee is not provided, for valuation of stock purposes
a. Consider all expenses of consignee
b. Ignore all expenses of consignor
c. Consider all expenses of consignor d. Ignore all expenses of both
c. Consider all expenses of consignor as non-
recurring in nature.
37
Provide for commission for unsold stock in the books of consignor on the lines of principle of
conservatism
a. Recommended practice
b. Ignore it as the sale had not taken place c. Consider it as consignee will sell in the
future
d. Consider even the sale also in any case goods will be sold in the future
b. Ignore it as there is no obligation
whatsoever for the
unsold stock. Payment of commission will arise only when sale is over.
38
Goods are sent at invoice price because
a. Consignor wanted to preserve the secret of margin from consignee.
b. As a matter of statutory requirement to accompany a document along with the
consignment at probable selling price.
c. Indicate the likely commission payable to consignee
d. To value the closing stock at invoice price.
b. As a matter of statutory requirement
to satisfy authorities when checking takes place at check posts
in the border of
states when consignment moves.
39
Goods lost at consignee’s place shall be claimed only by
a. Consignor b. Consignee
c. Insurance company d. Godown owner
a. Consignor is the owner of the stock
having insurable interest shall claim in the event of loss
wherever.
40
Consignment business has a. Going concern concept b. Conservatism principle c. Dual aspect concept
d. All the above
d. all the principles and concepts are present through out in consignment
41
The following statement is not false
a. Consignment and sale are same
b. Consignor and consignee are partners
c. Unsold stock is valued lower of cost or NRV
d. Consignment is like sale or return
c. Unsold stock is valued lower of cost or NRV
42
The following statement is not true
a. Stock is valued at lower of cost or NRV
b. Stock is to valued at purchase cost plus
b. Stock is to be valued at purchase cost and pro-
recurring expenses of consignee
c. Del credere commission is calculated on total sales
d. Consignment account is nominal account
porationate non- recurring expenses of
both consignor and
consignee.
43
Non-recurring expenses/non-selling expenses incurred by consignee is taken in the computation of Abnormal loss reported at consignee’s godown
a. False
b. True
c. Partly true
d. Neither true nor false
b. True. Expenses incurred by consignee shall be considered
for accidental loss
reported at consignee’s place
44
Non-recurring expenses/non-selling expenses incurred by consignee is taken in the computation of Abnormal loss reported on transit
a. False b. True
c. Partly true
d. Neither true nor false
a. False. Expenses of consignee are
incurred after the report of loss. Hence not to be taken
45
Abnormal loss is treated like closing stock;
therefore
a. It should be valued only at cost b. It should be valued at NRV
c. Lower of a and b d. None of the above
a. For cost ascertainment
purposes it should be
treated just like closing stock does
not mean cost or NRV whichever is lower to be followed.
Problems from 46 – 50 are based on the following illustration
1000 boxes costing Rs.250 each sent on consignment. Rs.10000 spent on freight. 20 boxes were damaged beyond repair. Insurance
company paid Rs.4000. Consignee took delivery
of 1000 boxes and spent for carriage and freight on taking delivery Rs.19600. Sold 900 units by consignee for Rs.412 each. Commission is 10%
46
What is the cost of damaged boxes?
a. 5000 b. 5239 c. 5200
c. 5200. Cost @ 250 plus prorata expense incurred by consignor is to be taken.
d. 8240
47
What is the loss to be transferred to profit and loss account?
a. 8240 b. 4240 c. 5200 d. 1200
d. Cost of damaged item was Rs.5200.
Insurance company paid Rs.4000. The balancing figure of Rs.1200 shall be
transferred to Profit
and loss account
48
How many units were taken delivery by consignee?
a. 920
b. 980 c. 900
d. None of the above
d. None of the above. Though the
consigned goods
were damaged, consignee took delivery for the entire
1000 boxes.
49
Consignee’s expenses of freight shall be applied on
a. 1000 units b. 900 units
c. 980 units
d. 960
c. Though 1000 boxes were taken delivery, only 980 boxes for which care
would be given for
safe delivery
50
What is the value of closing stock?
a. 20000 b. 22400 c. 22960 d. 22368
b. Refer working notes
CAclubindia
