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Save consignee formula

hello friends welcome to let students see so we have already seen the basic concepts of a consignment we have seen journal entries we have seen valuation of stock we have also done three problem solves on the consignment accounting in today's session we are going to learn in consignment accounting with what will be the accounting effect if the goods are invoice at above the course [Music] now what is this when consignor send goods to consign e and cans any further saves the quotes it is quite possible that the designee knows the profit which is owned by the pensioner because when consignor send the goods if the cost of the boots is 100 and consignor send the goods at 100 rupees to consign e and khazzani save those goods at 125 then consign II know that that is the profit of 25 apiece so many a times it happens that consignor does not want to disclose the actual cost to the consign e organs I never wants to hide the hidest profit if the concern he knows the profit it is quite possible that consigning may enter into competition in future with the consignor and consign he directly purchase the goods from the other dealers and he himself say the woods in turn off on the agency basis so to avoid this provable competition got to hide the profit consignor might send the goods to consign e at a price which is higher than the in cost price which is known as invoice price so what consignor does consignor add some extra profit to the cost and send the goods at the invoice price now for example if the cost of goods to consignor is hundred rupees consignor might an ad 20 rupees profit and sends the woods to consign e at 120 rupees now this invoice price is not a selling price yet okay it is just the fries at which consignor transfer goods to the pan Johnny now for the consignor might cartel fans I need to see all those goods at 120 it says so consign even PU that he has received the boots at 120 maybe worse and xenon has already added the profit of wenting and consign e is instructed to save those books at 120 itself so consign evil not know how much profit is the consignor earning on this transaction or consignor might say that this 120 worth of goods you have to say that 150 so in that case consigning feels that is a profit of 30 rupees but instead consignor is earning a profit of 50 rupees because the cost was 100 in was price was 120 but the further selling price was 115 so consignor is earning a profit of 50 rupees but consignees team that there is a profit of only 30 rupees so for all this reason Kanchana what does come at times consignor does not want since i need to know the cost of goods so the consignor then invoices the woods and in noise price and what is this invoice price consignor adds some profit element to the course and invoice that those push to the convenient this invoice price now one more important thing over here is this loading or this profit which is added by the consignor is unrealized profit this is not yet earned by the consignor this profit was charged when the goods are sent to consigning when consigning actually see those goods that time that entire profit is on by the consignor so guys this loading or this will be called as unrealized profit this is just a profit which is charged by the consignor but not yet realized not realized still till the goods are sold to the final customer okay once the goods are sold to the final customer that time we can say that this profit is realized profit now how will you deal with this transactions first of all will see the calculation of how to calculate this loading or invoice price so for example if the cost of goods is one like twenty thousand good side invoice at twenty percent above the invoice price so if you want to find out the invoice price or if you want to find out the loading how will you do we say is cost plus loading is invoice price now what is this this is twenty percent above the invoice price good sir invoice at twenty percent above the invoice price so if I assume invoice price is hundred then profit that is loading would be twenty twenty percent above invoice price so on invoice price it is twenty percent though that is twenty then the cost would be eighty so guys do remember you assume hundred the Prophet is livid so if it is 20% on costs we assume Costas and then if it is 20% on invoice price you assume invoice prices and rid the cause that will give you a proper figure of loading and the third one would be the balancing figure now in this case cost of goods sold is one would send is one like we thousand so if this cost is one like 20,000 with the proximal duplication you can find off loading and invoice price you so you can just cross multiply so that is one like 20,000 into 20 divided by 80 so you're loading comes to 30,000 and your invoice price will come to one left 20 plus 30 you can do that would be 150 or in 200 again cross multiply divide by 8 someone let 50000 again one more example if the goods are sent on consignment at three legs that is F invoice price and good sir invoice at cost plus 25 percent and in this case this 3 less is invoice price and if you want to find out cost and loading then how will you calculate so guys this is going to come in your questions so this is just I would say a part of your question where you need to find out loading element so if the question says this relaxes invoice price and loading is on course now what will you has you hundred this is cost plus 25% so you assume cost has ended because on that you will get the round figure of profit 25 loading 25 so in this case your invoice price would be 125 now this 3 lakhs is cost an invoice price it is invoice price if 3 lakhs is one leg is 125 then 25 is how much 100 is Hallman so just cross-multiply 3 lakh in 225 divided by 125 so that a 60,000 and 3 lakhs into 100 divided by 125 so that would be 2 lakh 40,000 so like this you can find out the cost or the loading or the invoice price this is required that I'll explain you further how why this is required but you understood this so first of all you see is the cost of goods is given or is the invoice price is given then profit is charged on invoice price of proper discharge on court accordingly first write the equation then write the amount which is given over here the cost was given over your invoice face was given and other figures will be find out by the cross multiplication now in consignment account how will this vide Kordich so this is your loading now when the goods are sent to consignment sent on consignment to the panzini it would be sent in this case at invoice price that means when I say in consignment account debit to would send on consignment we sent pro forma invoice with the goods when we send the boots to the panzini so in that pro forma invoice if this is the case whether we would have written 3 lakh rupees for the Watts or two lakh forty yes we would have written 3 lakhs because boots are sending on consignment at a noice price so if this is the case we write good send on consignment is invoice price but now consignor knows that this is not the actual purchase cost this invoice price has derived by adding the unrealized profit to it so when you record good send atomize price at the same time you will reverse the loading on the same so with the same account name by good sent on consignment and you will reverse the loading for the same so if this is the scenario you're good sent on consignment will come at 3 lakh rupees and your loading will come at 60,000 rupees if this is a scenario though the cost of goods was given as 120 but still you will record your good send on consignment at invoice price because it was sent at invoice place so it was invoice at invoice price so you write good send on consignment as 1 lakh rupee rosa and you're loading would be 30 thousand now this was not done in the previous problems where we have are done 3 questions on that because they're the were saying at course but over here the good cells attend in verse face first point second point now you think instead of recording this at invoice price and these are loading it is better to show it as cost agreed because net effect is cost the invoice price minus loading will give you cost so I agree your point but when you check with the pro forma invoice now when you do accounting you have a supporting documents for that accounting and for this good send the supporting document is the pro forma invoice pro forma invoice is the rough invoice it is similar to invoice which is send back on designer to concern you giving details of all the Bhoots so when you verify with the pro forma invoice if this is the scenario the amount which will be written on pro forma invoice would be 3 lakhs and if you write good send on consignment has to like 40 you are not doing accounting entry as for your pro forma invoice so in that case with the physical document or our visa documentary evidence with the physical document you record you would send on consumer as 3 like itself because goods are invoices 3 lakh rupees ok so goods are invoice at 3 lakhs so you write this as 3 lakhs and then you reverse the loading because this is in your books this is this consignment account is prepared in the books of consignor so Kansai Nene does not know this loading element and everything so this is done in the books of consignor then we record the transaction at invoice price since the boots are invoice that invoice price but since the net profit is to be transferred to PN N and if you don't reverse the loading then this would give you a wrong net profit figure so that is why we reverse the loading element to find out the net Purchase cost of this goods so guys you understood this now what other transactions on which the loading is to be done all those transactions where it is recorded invoice price and there is a unrealized profit you need to reverse that so now this was good sentences as well as purchases one more is your opening storm so that actually comes above this for opening some good address to stock on consignment this is your opening stock now for this opening stock also since we record this because the stock this opening stock is lying with the Kansai knee so with the Kansai knee it is lying at invoice price so this would be also at invoice price so for this invoice price again we will reverse the loading but for the opening and closing stock we open a new account Carla stock reserve account because that would scare you forward like it opening stock account now get scary forward your stock account get scary forward at invoice price so against which I will have to record a loading account to net of that effect so that account is called a stock reserve account so I would say buy talk reserve account this is loading on opening stock now when the goods are sent it is possible that goods could be reversed or returned by the Kansai knee so if goods are returned by the consigning to consignor it will come on the credit side by good send on consignment of home and this I will write as return the booth which has returned and on which you will again reverse the loading now which would be returned by the consign II at invoice price itself because he has received boots at invoice price so this would be also at invoice price so you reverse the loading and it will be recorded in the same account because do remember that good sent on consignment accounts balance goes to where that goes to trading or purchases occur so if I am transferring would send on consignment balance to trading person it should be a correct figure at course so if it is at invoice price it will be reversed in the same account at core or at loading would send on consignment account and this would be loading on return next they can be abnormal loss no abnormal loss can be in transit when the goods are going from consignor to Kansai knee or it can be in the godown of the Kansai knee when the boots has reached to the Kansai knee so when the goods have received by the panzini or boots are sent it has it is standard invoice price so any laws which will calculate from this good sense will be at invoice wise itself but the profit which I have not owned how can I say I say that I have lost that profit okay so on this also we will reverse the loading in the same account to have normal loss account loading on the scene okay and lastly closing stop now if when the goods are see or sold by the fence I mean you do not reverse loading on that because on sales we realize the profit this is actually unrealized profit profit is not done but still consignor is starting some profit some loading on the course to find out the invoice price but when the goods are actually sold by the panzini that is your realized profit so never ever loading on the sales because that is a realized profit okay and lastly closing stock so close for closing song we write as buy stock on consignment account this closing becomes next year's opening and this is last year's closing which is current year's opening so first off we open account nest stock on consignment upon this is my closing stock and for closing stock we will reverse loading now again closing stock would be part of goods sent so that would be all set invoice price so for reversing its loading we write has to talk reserve account this is loading on closing stock so now if you see this stock Reserve account which is on the closing stock which is carry forward will become will be carry forward and will be will become next year's opening stocks reserve and would be credited so if you see over here this is the opening stock which would be last year's closing stock and this stock reserve which would be last year stock Reserve and closing stock which is brought forward in the current here and it is adjusted against the opening song so this cycle goes on now this closing song will become next year's opening stock and this talk resume also gets carried forward and will become next year's opening stock stock reserve so guys you understood this consignment account so it is very simple what you have to do you have to record all your goods transaction except for the sales because sales is realized ok realize profit so you have to record all your goods transaction with sent opening stock good send goods return abnormal loss and closing stop all this fight on sections you have you have to report at invoice price if it is given in the question so like the previous sums where there was no inverse space mentioned so we don't recorded invoice price be reported course itself there was no loading concept but if it is given in the question that it is sent and loading some profit has been charged by the consignor so in that case that 5 things opening with send goods return abnormal rows and closing stuff recorded invoice price and on the opposite side on the reverse side you reverse that routing among simple you have to do only five strings extra this entry anyways you pass just blue things so on that you have to just reverse the loading now I'll just quickly go through the entries because they might ask you on entry question so you must know the entries now you you can find our make the entries easily from this account but logically we will go now first of all opening stock what is the entry for opening stock consignment upon gets their debited so guys this all 5 entries we have discussed in over to online trees ok so this are the normal basic entry I'm just writing this for the loading purpose and now when you record the same green you will record at invoice price when the goods are invoice at invoice price ok so consignment account debit to for opening stock me write us to stock on consignment account and for that the loading entry would be if this is consignment debit so it will come on the reverse side so consignment credit and opening stop loading goes to stock Reserve account so stock reserve account debit to consignment upon guys this is your this entry stock Reserve account debit to consignment of on consignment account is credited next good send on consignment now you must know this basic entries we have done this many times consignment a conduit to would send on consignment account if you are still confused you can refer to the basic journal entries video and then you see this entries video she'll be more clear and for this loading if this is consignment debit so loading would be credited to consignment account so to consignment account and for this with sent on consignment we are debit the same account because that then the balance in the good sent on consignment account will come at Cosco so this is invoice price credit this would be loading damaged so net cost will come input sent on consignment account and balance of good sentence and gentleman account is transferred to trading or purchases account with sent on consignment account debit next goods returned by the consigning if this is the good side entry returned entry would be reverse so we are receiving goods back so good send on consignment debit debit what comes in to consignment account it is as good as your purchase return so when the when there is a purchase we debit the consignment account and purchase it done we generally get up but there is a year you cannot did a few so that is why you credit the consignment account and the loading entry would be yes your the consignment is creates opened arrangement will get debited consignment account debit to good sent on consignment account next epidural loss account so goods are going on losses your loss will get debited so abnormal loss account debit never tall losses to consignment account and loading on the same if consignment is great so then consignment would be debited we have normal loss of our again abnormal loss is recorded invoice price but if 100 rupees is the cost and 120 is the inverse price and if one quantity is lost we cannot say we have a loss of 120 because the cost of the goods was hundred rupees so against this 120 I will reverse the loading of 20 rupees so consignment of normal loss of con 20 so net in abnormal loss account and consignment I found 100 rupees will be reflect and last closing so country's what will be the entry closing stock so consignment account credited stock on consignment account debit to consignment account and loading on the same if consignment is created so for loading consignment will debit with the loading amount consignment around every 2 for opening and closing stock we open a new account called stock reserve account because this reserve will get set-off against the stock which is at invoice price and net cost would be reflected now this I have already explained that stock on consignment second if a goes to stock on consignment account which is shown in your assets had in the Balanchine do remember that these visa can please if this is a loading concept this basic entry you have to pass at invoice price and all the further amounts of the loading so these entry you have to pass with the loading amounts you know that you don't have to pass angry with the course automatic the net effect will reflect the course so guys you understood this loading concern and further sessions we are going to solve the problems based on this loading concep ok thank you [Music] [Music]