Addis

Addis Ababa University

College of Business and Economics
School of Commerce
Accounting and Finance Department
Advance Accounting Individual Assignment 3

Submitted to: Instructor Kiros.A

May, 2020

Addis Ababa, Ethiopia

 Answer for the following Question.

1 .Consignment: is a transfer of possession of merchandise from the owner to another person who acts
as the sales agent of the owner.

Consignment: Sales of Goods

- dispatching (forwarding) of goods from - The transfer of property from the

One person to another person. seller to the buyer.

- Legal ownership of the goods is passed on the buyer.

- legal ownership is not passed on the agent. -in a sale, to relationship is that of the buyer & a

- The relationship b/n the consignor & consignee seller.

is one of the principal and agent. -in a case of sales the ownership of goods passes

-in the case of consignment, consignor can send immediately to the buyer

goods to consignee without receiving order from him. – in the case of a sale, expense after delivery are

-in the case of consignment, all expense before and borne by buyer.

after delivery borne by buyer the consignor. – in a case of sale, a seller sends goods to the

buyer only after receiving order from him.

2, Write short notes on:

a) Del Credere Commission ; sometimes the principal gives extra commission to the agent for the
recovery of credit sales made him. Thus cash realization becomes his duty .there are chance of bad-debt
out of credit sales. In order to compensate him for bad-debts, some extra commission is calculated on
the amount of sales unless it is especially given that extra commission to paid only on credit sales. In
other words, for the ordinary commission, the agent is not responsible for any bad debts that may
occur. If for credit sales some amount cannot be collected. The consignor will suffer the loss. If the agent
has to be made responsible, he will have to be paid on extra commission, called Del Credere
Commission. For such a commission, which is payable on total sales, the agent will be responsible for
any bad debt, however, if the amount cannot be collected because of any dispute , the agent will not be
liable.
b) Valuation of Unsold Stock in Consignment; where all the goods have not been sold, it becomes
necessary to value the unsold goods. The stock lying in the hand of consignee at the end of accounting
year is valued at cost market price whichever less is. If all the gods are not sold by the consignee within
the accounting period, then the unsold stock is brought into account by the consignor. The cost of
unsold stock or closing stock should be valued at cost to the consignor plus proportionate non-recurring
expense incurred by the consignor and consignee. as usual, the unsold stock in the hand of consignee
should should be valued on the cost price or market price whichever is less. The consignment stock
account is an asset and will be shown in the balance sheet.

Calculation of value of unsold stock; it is calculated as,