Loan Capital – Debenture Types II

 

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In today’s class, we will be talking more about loan capital – debenture types. Enjoy the class!

Loan Capital – Debenture Types II

Loan Capital – Debenture Types | classnotes.ng

Consignment of good means the sending of goods by a supplier to his agent to receive, store and sell them on behalf of the supplier after which the proceeds, having deducted all expenses incurred, will be remitted to the supplier. The sender of the goods is called consignor while the agent to whom the goods are sent is called consignee.

Accounting Entries

In the  Books of the consignor, you will open

  • Consignment account:
  1. Debits all expenses relating to goods consigned
  2. Credits all revenue relating to goods consigned
  • Goods sent on consignment account:
  1. Debit trading a/c with the value of goods consigned
  2. Credit consignment account
  • Bank account (Extracts):
  1. Debit proceed from consignee (agent) after deducting all expenses incurred.
  2. Credit all expenses incurred by the consignor.
  • Consignee account i.e Debit sales account
  1. Credit all expenses incurred in respect of sales

Evaluation

  1. Define the term consignment of goods
  2. Explain a. Consignor b. Consignee
Practical Illustration

On January 1, 1995, Pfizer Product Plc consigned 10 cartons of Visine eye drop to Standard Pharmacy at N150 per carton. In the course, he paid N400 for freight charges, N140 for insurance, and N850 for advertisement. On receiving the goods on January 5 Standard Pharmacy incurred the following expenses. Storage N100, wages N380, selling expenses N120. By January 24, Standard Pharmacy had sold all the articles and realized a total sum N21,500 in the following analysis is sales by cash N20,000, Credit sales to Kunle N1,500. The agreed commission was 3% and a del-credere commission was 2% of the total sales. Required

  1. Prepare the account submitted by the consignee on 31/1/95
  2. Prepare all necessary account to record the transaction in the books of the consignor.

Solution

  1. Account sales submitted by Standard Pharmacy

N                                 N

Sales                                                                                       21,500

Less: Storage                                    100

Wages                                   380

Selling expenses                 120

Commission: General (0.03 x 21,500)   645

‘’         Del-credere (0.02 x 21,500) 430                          (1,675)

Sight draft enclosed                                                          19,825

  1. In the books of Pfizer Product Plc. (consignor)

Good sent on consignment account

Trading a/c (N1,500 x 10) 15,000                   consignment           15,000

Consignment Account

Goods sent on consignment  15,000   standard pharmacy                     21,500

Bank: freight cheque                  400

Advertisement                  850

Insurance                           140

Standard Pharmacy

Storage                                           100

Wages                                             380

Selling expenses                           120

Commission: General                 645

Del-credere commission           430

P&L a/c (profit)                          3,435

21,500                                                                   21,500

Bank account (Extracts)

Standard Pharmacy         19,825                        Consignment             N

Freight charges      400

Advertisement        850

Insurance                 140

 

Standard Pharmacy account (consignee)

Consignment: sales           21,500                        Consignment                 N

Storage                          100

Wages                            380

Selling expense            120

Comm. General          645

Del-credere   430

Bank                           19,825

21,500                                                            21,500

General evaluation
  1. What are books of prime entry
  2. List any seven books of prime entry
  3. Explain the following concepts (a) business entity (b) going – concern
  4. What is a ledger
  5. List and explain three classifications of ledger accounts

 

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