Question

A consigned to B on 1st January 2018, 600 bales of cotton costing Tk.120 per bale. Freight charges incurred on the consignment were Tk.6,000. A drew a bill on B for Tk.45,000 payable on 30th June,2018 which B accepted. The bill was discounted by A with his banker on 1st March,2018 at 10% p.a. B rendered account to A on 31st March 2018 showing sales of 300 bales for Tk.90,000 and selling expenses of Tk.5000. B’s commission was 10%. On this date B remitted to A the net amount due to him. On 31st May 2018, B sold the balance stock for Tk.40,000 after incurring expenses of Tk.5,000. He remitted Tk.28,000 to A, the balance being treated as commission earned by him.

Pass journal entries in the books of A

Answer 1

Amounts are in "Tk"

Journal entries

On January 1st 2018

Consignment a/c 72,000

Goods sent on consignment a/c 72,000

(600 bales sent on consignment which cost 120 per bale)

On January 1st 2018

Consignment a/c 6,000

Cash a/c 6,000

(Freight expense incurred on goods consigned)

On January 1st 2018

Bills Receivable a/c 45,000

Consignee B a/c 45,000

(A bill of TK45,000 drawn on consignee and accepted by him)

On March 1st 2018

Cash/ Bank a/c 43,500

Discount allowed a/c 1,500

Bills receivable a/c 45,000

(Bills discounted with bank at 10% and 4 months remaining on bill)

(45,000 x 10% x 4/12)

On March 31st 2018

Consignee (B) a/c 90,000

Consignment a/c 90,000

(Sales of 300 bales made by consignee recorded)

On March 31st 2018

Consignment a/c 14,000

Consignee (B) a/c 14,000

(Expense of 5,000 and 10% commission for consignee recorded)

On March 31st 2018

Cash a/c 31,000

Consignee (B) a/c 31,000

(Net amount of sales after deducting commission, expense, bills receivable amount now received)

On May 31st 2018

Consignee (B) a/c 40,000

Consignment a/c 40,000

(Balance 300 bales were sold and the entry recorded)

On May 31st 2018

Consignment a/c 12,000

Consignee (B) 12,000

(Expense of 5,000 and commision on sales of 7,000 recorded)

On May 31st 2018

Cash a/c 28,000

Consignee 28,000

(Balance amount due from Consignee received)

Note :

Commission on sales of second lot = 40,000 - 5,000 - 28,000 = 7,000

Amount to be received from first sales = 90,000 - 45,000 - 14,000 = 31,000