Consignment Stock Interview Questions Answers

  • Question 1. Give The Journal Entry In The Books Of Consignor For Valuation Of Stock?

    Answer :

    Stock On Consignment A/C Dr     xxx 

     To Consignment A/C                      xxx 

  • Question 2. What Is The Accounting Treatment For Normal Loss?

    Answer :

    The cost of normal loss is considered as part of the cost of production in which it occurs. If normal loss units have any realisable scrap value, the process account is credited by that amount. If there is no abnormal gain, then there is no necessity to maintain a separate account for normal loss.

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  • Question 3. What Is The Difference Between Consignment And Sales?

    Answer :

    1. When the goods are delivered to the agent by the owner for selling purposes is known as consignment whereas a transaction in which goods are exchanged for a price is known as a sale. 
    2. The Parties involved in consignment are Consignor and consignee sharing the relationship of a principal and agent whereas the parties involved in sale are seller and buyer sharing the relationship of a creditor and debtor.
  • Question 4. When Is Stock Consignment Account Opened?

    Answer :

    Some concerns prefer not to mix cost of goods sent on consignment, sales and expenses in the same account. In such a case, an account, called Consignment Stock Account is opened and debited by the cost of opening stock in the hands of the consignee and the cost of goods sent.

  • Question 5. Give The Journal Entry In The Books Of Consignee On Commission Being Earned?

    Answer :

    Consignor Personal A/C Dr xxx 

    To Commission A/C xxx

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  • Question 6. How To Calculate Value Of Unsold Stock?

    Answer :

    Value of unsold stock= Cost Price of Closing Stock+ Proportionate non- Recurring Expenses 

  • Question 7. Explain The Three Accounts Maintained By Consignor?

    Answer :

    1. Consignment Account: It is a nominal account. It is in fact a Special Trading and Profit and Loss Account. The balance, in this account, represents either profit or loss on consignment which is finally transferred to General Profit and Loss Account. 
    2. Consignee’s Personal Account: It is a personal account. It is mainly prepared to ascertain the amount due from the consignee.
    3. Goods Sent On Consignment Account: it is a real account.
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  • Question 8. How Is Abnormal Gain Calculated?

    Answer :

    Abnormal Gain= Actual Production-Expected Production.

  • Question 9. Give The Journal Entry In The Books Of Consignee On Sales Being Affected?

    Answer :

    Cash ( or Bank) A/C Dr xxx

    To Consignor’s Personal A/C xxx

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  • Question 10. What Is Normal Loss?

    Answer :

    Normal loss means that loss which is inherent in the processing operations. It can be expected or anticipated in advance i.e. at the time of estimation.

  • Question 11. Give The Journal Entry In The Books Of Consignee For Valuation Of Stock?

    Answer :

    No Entry is to be made in the books of consignee for valuation of stock. 

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  • Question 12. What Do You Mean By Valuation Of Unsold Stock In Accounting For Consignment Of Goods?

    Answer :

    The stock lying in the hands of consignee at the end of accounting year is valued at cost or market price whichever is less. The cost of unsold stock or closing stock should be valued at cost to the consignor plus proportional non- recurring expenses incurred by the consignor and consignee.

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  • Question 13. Who Is A Consignee?

    Answer :

    In a contract of carriage, the consignee is the entity who is financially responsible ( the buyer) for the receipt of a shipment. Generally, but not always,the consignee is same as the receiver.

  • Question 14. What Is Abnormal Gain?

    Answer :

    If the actual loss of a process is less than that of expected loss then the difference between the two will be treated as abnormal gain.

  • Question 15. Who Is A Consignor?

    Answer :

    Person or firm ( usually the seller) who delivers a consignment to a carrier for transporting it to a consignee ( usually the buyer) named in the transportation documents. Ownership ( title) of the goods remains with the consignor until the consignee pays for them in full.

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  • Question 16. What Is An Invoice?

    Answer :

    An invoice is a commercial document that itemizes a transaction between a buyer and a seller. An invoice will usually include the quantity of purchase,price of goods and / or services, date, parties involved, unique invoice number and tax information. 

  • Question 17. Give The Journal Entry In The Books Of Consignor For Commission Payable To The Consignee.?

    Answer :

    Consignment A/C Dr xxx 

    To Consignee’s Personal A/C xxx

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  • Question 18. Give The Journal Entry In The Books Of Consignor For Expenses Incurred By The Consignee.?

    Answer :

    Consignment A/C Dr xxx

    To Consignee’s Personal A/C xxx

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  • Question 19. What Is The Accounting Treatment For Abnormal Loss?

    Answer :

    Process account is to be credited by abnormal loss account with cost of material, labor and overhead equivalent to good units and the loss due to abnormal is transferred to costing Profit and Loss account.

  • Question 20. Give The Journal Entry In The Books Of Consignee On Commission Being Earned.?

    Answer :

    • Consignor Personal A/C Dr xxx 
    • To Commission A/C xxx
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  • Question 21. What Is Account Sales?

    Answer :

    When goods are dispatched, the consignor makes out a ” Proforma Invoice” that is, a statement which looks like a regular invoice but which does not make the consignee responsible to pay the amount named. This proforma invoice is known as Account Sales.

  • Question 22. What Is Del Credere Commission?

    Answer :

    The additional commission for which the consignee guarantees debts is called Del Credere Commission. The agent is responsible for bad debts but not for loss due to dispute between the buyer and the seller. Del Credere Commission is payable on total sales and not merely on credit sales.

  • Question 23. What Is Stock Reserve?

    Answer :

    Stock reserve or buffer stock is a stock quantity which is based on the normal average expected consumption during the lead-time to replenish depleted stock.

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  • Question 24. Give The Journal Entry When Consignment Is Partly Sold?

    Answer :

    Stock on Consignment A/C Dr xxx

    To Consignment A/C xxx

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  • Question 25. Give The Journal Entry In The Books Of Consignor On Dispatch Of Goods?

    Answer :

    Consignment A/C Dr xxx 

    To Goods Sent on Consignment A/C xxx 

  • Question 26. What Is Abnormal Loss?

    Answer :

    Abnormal loss means that loss which is caused by unexpected or abnormal conditions such as accidents, machine breakdown, substandard material etc. From the accounting point of view we can say that abnormal loss is that loss which occured over and above normal loss. 

  • Question 27. What Is The Journal Entry In The Books Of Consignor For Profit?

    Answer :

    • Consignment A/C Dr xxx 
    • To Profit and Loss A/C xxx
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  • Question 28. What Is Consignment?

    Answer :

    Consignment is the act of consigning, the act of giving over to another person or agent’s charge, custody or care any material or goods but retaining legal until the material or goods are sold

  • Question 29. What Is The Accounting Treatment For Abnormal Gain?

    Answer :

    The value of abnormal gain is transferred to the debit side of the relevant process and ultimately closed by crediting it to the costing Profit and Loss account.

  • Question 30. Why Is Consignment Not A Sale?

    Answer :

    Following are the reasons that explain why consignment is not a sale:−

    • Ownership: Ownership of goods need to be transferred from seller to buyer in case of sale, but ownership of goods remains with the consignor, till the goods are sold by the consignee.
    • Risk: In case of a consignment, normally, risk remains with the consignor in the event of goods being lost or destroyed.
    • Relationship: The relation between a seller and a buyer will be of debtor and creditor in case where goods are sold on credit basis. On the other hand, the relationship between a consignor and a consignee is that of principal and agent.
    • Goods Return: Usually, the sold goods cannot be returned back; however, if there is any manufacturing defect or any other technical fault, seller is obliged to take them back. On the other hand, consignee may return the unsold stock of goods to consignor anytime.
  • Question 31. What Is The Valuation Of Unsold Consignment?

    Answer :

    Valuation of unsold stock will be done like a closing stock of a Trading concern and should be valued at the cost or the market price whichever is low.

    This stock will be valued at:

    • Proportionate cost price and
    • Proportionate direct expenses.

    Here, proportionate direct expenses mean — all expenses incurred by the consignor and the expenses of consignee, which are incurred by him till the goods reach the warehouse.