The normal or abnormal loss stocks may be sold either by the consignor or the consignee. The sale realisation may have been received by them in cash or through a cheque or may be still receivable by them.
The realisation/sale proceeds from the sale of Normal or Abnormal Loss Stocks, can be considered net, by deducting the commission on sale payable to outsiders. However if the organisation intends to have complete information relating to the commissions paid/payable, it should also be recorded in the books separately.
The commission paid/payable would be added to the value of the "normal loss stock" or "abnormal loss stock" as the case may be. The sale proceeds are credited to these accounts. Debiting the amounts would give the same effect as deducting the commissions from the sale proceeds.
The treatment would be the same whether the normal loss stock or the abnormal loss stock arises in transit or in storage.
Accounts Effected by the Transaction » Identification & Analysis:
Debit »
-
27: Normal Loss a/c
The commission on sale of normal loss stock has to be deducted from the Sale realisation of Normal Loss Stock and as such is debited to the "Normal Loss a/c" to give the same effect.
[Normal Loss a/c – Real a/c – Debit .... ]
-
28, 29: Abnormal Loss a/c
The commission on sale of abnormal loss stock has to be deducted from the Sale realisation of Abnormal Loss Stock and as such is debited to the "Abnormal Loss a/c" to give the same effect.
[Abnormal Loss a/c – Real a/c – Debit .... ]
Credit »
27:
Since the expenditure is incurred by the consignor it should be credited to the
Cash a/c
If the commission had been paid in cash
[Cash a/c – Real a/c – Credit what goes out.]
Bank a/c
If the commission had been paid by cheque
[Bank a/c – Personal a/c – Credit the benefit giver.]
Commission Payable a/c
If the commission is still outstanding to be paid
[Commission Payable a/c – Personal a/c – Credit the benefit giver.]
Note:
Any nominal account prefixed/suffixed by the terms outstanding, prepaid, still receivable, still payable etc., is a personal account and not a nominal account
28, 29: M/s Maruthi Traders a/c
Since the expenditure is payable by the consignee he stands in the position of the benefit giver. Therefore the consignee a/c is credited.
[Consignee a/c – Personal a/c – Credit the benefit giver.]
The effect of the transactions can be summarised as
| 27 : | (i) Normal Loss a/c and (ii) Cash/Bank/Commission Payable a/c |
| 28 : | (i) Abnormal Loss a/c and (ii) Consignee a/c |
| 29 : | (i) Abnormal Loss a/c and (ii) Consignee a/c |
| Date |
Particulars |
J/F |
Amount
(in Rs) |
Date |
Particulars |
J/F |
Amount
(in Rs) |
30/06/05
|
To Cash a/c (27)
(Or) Bank a/c
(Or) Out. Exp a/c
|
–
|
75
|
|
|
|
|
| Date |
Particulars |
J/F |
Amount
(in Rs) |
Date |
Particulars |
J/F |
Amount
(in Rs) |
30/06/05
30/06/05
|
To M T a/c (28)
To M T a/c(29)
|
–
–
|
150
120
|
|
|
|
|
| Dr | M/s Maruthi Traders a/c | Cr |
| Date |
Particulars |
J/F |
Amount
(in Rs) |
Date |
Particulars |
J/F |
Amount
(in Rs) |
|
|
|
|
30/06/05
30/06/05
|
To Ab.Loss a/c (28)
To Ab. Loss a/c(29)
|
–
–
|
150
120
|
|
Journal in the books of M/s __ for the period from ____ to _____
|
| Date |
V/R
No. |
Particulars |
L/F |
Debit Amount
(in Rs) |
Credit Amount
(in Rs) |
| June 15th |
– |
Normal Loss a/c
To Cash a/c
[For the commission on the sale of normal loss stock.]
|
Dr |
–
– |
75 |
75 |
| June 15th |
– |
Abnormal Loss a/c
To Maruthi Traders a/c
[For the commission on the sale of abnormal loss stock payable to the consignee.]
|
Dr |
–
– |
150 |
150 |
| June 15th |
– |
Abnormal Loss a/c
To Maruthi Traders a/c
[For the commission on the sale of abnormal loss stock paid by the consignee.]
|
Dr |
–
– |
120 |
120 |
Note:
The entries relating to the consignee payments can be clubbed together and a single entry written in its place. Only a single posting with the total amount would be visible in the records. This entry formed by clubbing just the amounts would not form a compound entry.
|
Journal in the books of M/s __ for the period from ____ to _____
|
| Date |
V/R
No. |
Particulars |
L/F |
Debit Amount
(in Rs) |
Credit Amount
(in Rs) |
| June 15th |
– |
Abnormal Loss a/c
To Maruthi Traders a/c
[For the commission on the sale of abnormal loss stock payable to and paid by the consignee.]
|
Dr |
–
– |
270 |
270 |
|
Accounts Effected by the Transaction » Identification & Analysis:
Since the consignee has to receive the amounts that are due to him as commission or the amounts that have been paid by him or payable by him, the transactions where the consignee is involved would have to be recorded in the books of the consignee.
Debit »
-
28, 29: M/s Innova Steels a/c
The amount being receivable from the consignor, the consignor stands in the position of a debtor. Therefore the "Consignor a/c" is to be debited. The consignor being the benefit receiver here his account would be debited.
[Consignor a/c – Personal a/c – Debit the benefit receiver.]
Credit »
28: Commission a/c
Since the commission that is receivable from the consignor is income to the consignee, the "Commission a/c" is credited.
[Commission a/c – Nominal a/c – Credit all incomes and gains.]
29:
Since the commission is paid out by the consignee it should be credited to the
Cash a/c
If the commission had been paid in cash
[Cash a/c – Real a/c – Credit what goes out.]
Bank a/c
If the commission had been paid by cheque
[Bank a/c – Personal a/c – Credit the benefit giver.]
Outstanding Expenses a/c
If the commission had not yet been paid out
[Outstanding Expenses a/c – Personal a/c – Credit the benefit giver.]
Note:
Any nominal account prefixed/suffixed by the terms outstanding, prepaid, still receivable, still payable etc., is a personal account and not a nominal account
The effect of the transactions can be summarised as
| 28 : | (i) Consignor a/c and (ii) Commission a/c |
| 29 : | (i) Consignor a/c and (ii) Cash/Bank/Outstanding Expenses a/c |
| Dr | M/s Innova Steels a/c | Cr |
| Date |
Particulars |
J/F |
Amount
(in Rs) |
Date |
Particulars |
J/F |
Amount
(in Rs) |
30/06/05
30/06/05
|
To Comm. a/c (28)
To Cash a/c (29)
(Or) Bank a/c
(Or) Out. Exp a/c
|
–
–
|
150
120
|
|
|
|
|
| Date |
Particulars |
J/F |
Amount
(in Rs) |
Date |
Particulars |
J/F |
Amount
(in Rs) |
|
|
|
|
26/06/05
|
By I S a/c (28)
|
–
|
150
|
Note:
The Commission account used to record the commission on sale of normal and abnormal loss stocks may be the same account that is used to record the commission on the sale of good stock or based on the needs of the organisation, a separate account may be created and used for recording this commission.
|
