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Send consignee calculated

hi guys in the last video of Consignment Accounts we have seen the Introduction of Invoice Price now let us see the accounting treatment when goods are sent at an invoice price so when the goods are sent at an invoice price everything will be based on the invoice price.Goods sent on consignment we take it on the debit side of the consignment account so this will be recorded at an invoice price similarly the closing stock which is credited on the credited in the consignment account will also be valued at an invoice price so we know if the goods sent on consignment is debited the goods returned by the consignee will be credited and if the closing stock is credited and then next year opening stock will be debited fine alright so all these four items needs to be adjusted by eliminating the loading from these items now what is loading? loading is the difference between the invoice price and the cost price let's say the cost price of an item is 100 and the invoice price of an item is 150 so the difference between these two the invoice price and the cost price would be the loading that is 100 - 150 equal to 50 rupees fine so now let us understand this treatment with the help of a small example how to remove the loading from these following items but now I will focus only on these two items that is good sent on consignment and closing stock these two the opening stock and the goods returned we will do that in the later problems all right now let us solve this example and understand the accounting treatment and how to prepare the consignment account when the consignor sends goods to the consignee at the invoice price so here in this example the consignor has sent ten cycles costing thousand rupees but invoiced at 1200 so here one thing you need to understand is that the cost of each cycle is one thousand but the invoice price is 1200 fine now the Consignee has received all the goods all the cycles and sold only 8 8 cycles at the price 1,500 so now we will prepare the consignment account and see how to make the consignment account so first we will take To Goods Sent on To Goods Sent on Consignment as usual but the only thing will be different here is that before we used to debit here the cost price but now since the consignor has sent the goods to consign at the invoice price so we'll take the invoice price that is 1,200 how many cycles 10 cycles he sent 10 cycles right so 10 x 1200 is equal to 12,000 fine after that the consignee is sold 8 cycles at the price 1,500 so the sales will come on the credit side as By Consignee which is 8 x 1500 is given in the question the quantity and the price is given in the question so by consignee 18 x 1500 is equal to 12,000 all right after that now here you if you see we have debited the invoice price not the cost price before we used to debit the cost price but since here we have debited the invoice price there is cost and profit and profit in it the cost is 10,000 which is 10 x 1000 10 x 1000 =10,000 and the profit which is the difference between the invoice price and the cost price 200 so that 200 x 10 is 2,000 10,000 + 2,000 equal to 12,000 so since there is profit in it the debit side has been increased so if debit side has been increased then our expenditure of consignor increases if expenditure of consignor increases then the profit will be decreased so the profit will not be correct because we know that the debit side is the expenditure side of the Consignment account so if expenditure increases the profit decreases we cannot arrive at the correct profit if we leave this profit as it is so we have to remove that profit we have to eliminate that profit so to eliminate that profit we must credit here By Goods Sent on Consignment now why are we crediting it because we are crediting it because here it is debited so remove that debit we have to make an equal credit so here the 2,000 profit is debited so to remove that you have to credit 2,000 profit this is also called as the loading the removal of the loading the removal of the profit fine alright next here only 8 cycles are sold sold so there is 2 cycles left so there is a stock left so that stock must be valued By Consignment Stock By Consignment Stock which is 2 into okay now we will value the consignment stock at the invoice price because the goods were sent an invoice price right so we'll value the consignment stock at the invoice price 2 x 1200 which is equal to 2400 alright now before we used to value the stock at the cost price but in this problem we have valued at an invoice price so here also there is an element of profit [cost + profit] the cost is 2 x 1000=2000 2 x 200 the profit that is 400 so 2000 plus 400 is the valuation of stock here all right so we have to remove that profit to arrive at the correct profit similarly as in the Good Sent on Consignment this is the revenue side right revenue side of the Consignment Account if revenue is more than the profit will be more but it will be overvalued profit not the true and correct profit so to arrive at the correct and true profit we must eliminate this profit so to eliminate this profit we have to debit here To Stock Reserve that is 2 into what is the difference between the cost price and the invoice price the cost was 1,000 and the invoice price was 1,200 so the difference is 200 right 1200-1000 so that is the profit right 2 x 200 is 400. why 2 because 2 cycles are left so 2 into 200 which is equal to 400 all right now we will balance the consignment account credit side is bigger 12,000+2,000+2,400 12,000+2,000+2,400 is equal to 16,400 so here also we write that on the both the sides 16400 minus these two 16,400 - 12,000 - 400 which is equal to 4,000 now 4,000 will be the profit on consignment profit and loss profit on consignment right this is the true and correct profit all right