DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH

Name : CH. ANURADHA

Designation : Lecturer
Branch : Commercial & Computer Practice
Institute : Govt. Polytechnic for women,
Bheemunipatnam
Year/Semester : IV semester
Subject : Accountancy-III
Sub-code : CCP-402
Topic : CONSIGNMENT ACCOUNTS
Sub Topic : Normal Loss and Abnormal Loss
Duration : 50 Minutes
Teaching aids : PPT, ANIMATION

CCP402.12 1
Recap

In the last class, we discussed about

 the preparation of consignment accounts
with invoice price

CCP402.12 2
Objectives:

On completion of this period, you would be

able to:

 Prepare Consignment Accounts with Normal Loss

and Abnormal Loss

CCP402.12 3
 Will there be any loss of stock while goods are
sent to the consignee?

 Yes, There may be.

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Loss is of two types

 Normal Loss
 Abnormal Loss

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Normal Loss:
 Goods are damaged or lost
 due to inherent nature of goods
 Eg: evaporation, leakage, dusting, drying &
sublimation
 This loss is unavoidable & natural

Eg:  Petroleum products, when stored

 a portion may be lost, due to evaporation

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Normal Loss

 Since this loss is unavoidable and usual

 No entry is passed in the books of
 Consignor
 Consignee
 but considered , while calculating the value of
unsold stock

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To calculate value of unsold stock
(Normal Loss)

Value of unsold stock =

Quantity of unsold stock

Total cost of the goods x
Total quantity of goods sent
- normal loss in quantity

CCP402.12 8
Illustration No.1:
 A Coal Co consigned goods to consignee
 2,000 tons of coal at a cost of Rs.15,000/-
 Consignor paid Rs.4,600/- towards freight
 Consignee sold 1,000 tons of coal &
 reported to Consignor a shortage of 40 tons on
the whole consignment
 Calculate the value of unsold stock

CCP402.12 9
Solution:

 Cost of 2,000 tons = Rs.15,000/-

 Add: Consignor’s Expenses = Rs.4,600/-
 Total cost of goods consigned = Rs.19,600/-

 Goods sent = 2000 tons

 Goods reached = 1960 tons
 Normal loss = 40 tons

 Stock of goods unsold = 1,960-1,000

= 960 tons
CCP402.12 10
To calculate value of unsold stock
(Normal Loss)
Value of unsold stock =
Quantity of unsold stock
Total cost of the goods x
Quantity of goods received by
consignee

960
= 19,600 x 1,960 = Rs.9,600/-

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Abnormal Loss:
 Goods are damaged or lost
 due to unforeseen factors
 Eg: floods, earth quakes, war, riot, insects, fire, theft,
& careless handling results in breakage
 This loss is unexpected & beyond the control of
businessman

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Abnormal Loss
 Since this loss is not natural and avoidable
 entries passed in the books of
 Consignor only

 Caculated in the same way as the stock on

consignment

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Abnormal Loss recorded in the books
of Consignor as follows

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Transaction

1. When the abnormal loss is not insured

Abnormal Loss a/c Dr. xxx

To Consignment a/c xxx

(Being the amount of abnormal loss valued)

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Transaction

2. Abnormal loss transferred to Profit and Loss a/c

Profit and Loss a/c Dr. xxx

To Abnormal Loss a/c xxx

(Being the loss transferred to P & L a/c)

CCP402.12 16
3. When the abnormal loss is insured & therefore
recoverable

Abnormal Loss a/c Dr. xxx

To Consignment a/c xxx

(Being the amount of abnormal loss valued)

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4. Abnormal loss transferred to Insurance Company

Insurance Company a/c Dr. xxx

To Abnormal loss a/c xxx

(Being the abnormal loss transferred Insurance

Company a/c)

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5. When the abnormal loss is insured & partly
recoverable

Abnormal Loss a/c Dr. xxx

To Consignment a/c xxx

(Being the amount of abnormal loss valued)

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6. For the partly recoverable abnormal loss
transferred to Insurance Company a/c and balance
transferred to P & L a/c

Insurance Company a/c Dr. xxx

Profit and Loss a/c Dr. xxx

To Abnormal loss a/c xxx

CCP402.12 20
Illustration No.2
 Hema of Hyderabad consigned 50 packets of tablets
 each costing Rs.150/- to his agent Nirmala & Co of
Nellore
 The Consignor paid
 Freight & Insurance Rs.250/-
 10 packets were destroyed on the way

CCP402.12 21
Illustration 2 contd.
 Gross sales 35 packets

 Consignee spent

 Godown Rent Rs.350/-

 Clearing Charges Rs.425/-

 Carriage outwards Rs.150/-

 Calculate the abnormal loss and the value of

 closing stock

CCP402.12 22
 Solution

Calculation of Abnormal Loss Rs.

Cost of tablet packets destroyed (150X10) = 1,500

Add: Proportionate expenses incurred by

= 50
Consignor
Freight and Insurance (250X10)/50
Value of Abnormal Loss 1,550

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Calculation of value of unsold stock:
Rs.

Cost of remaining 5 unsold packets

= 750
(50-35-10 = 5 ) 5 X 150

Add: Proportionate expenses incurred by

= 25

Consignor (250X5)/50 = 106.25

Consignee (425X10)/40
Value of unsold stock 881.25
CCP402.12 24
Illustration No.3

 Sukumar of Hyderabad consigned 150 watches

 each costing Rs.250/- to his agent Chakravarthy &
Co of Nellore
 The Consignor’s expenses Rs.1,500/-
 On the way, 20 watches damaged due to accident
and
 insurance claim of Rs.2,000/- accepted

CCP402.12 25
 Gross sales 110 watches @ Rs.325/-

 Consignee incurred

 indirect expenses Rs.200/-

 direct expenses Rs.650/-

 Calculate the abnormal loss and the value of

closing stock

CCP402.12 26
 Solution

Calculation of Abnormal Loss Rs.

Cost of tablet packets destroyed (20X250) = 5,000

Add: Proportionate expenses incurred by

= 200
Consignor
Cost of 20 watches 5,200
(1,500 x 20)/150
Add: claim received from insurance Co 2,000

Value of Abnormal Loss 3,200

CCP402.12 27
 Calculation of value of unsold stock:
Rs.

Cost of 20 watches @ Rs.250/- = 5,000

Add: Proportionate expenses incurred by

= 200
= 100
Consignor (1500X20)/150
Consignee
Value (650X20)/130
of unsold stock 5,300

CCP402.12 28
Summary

In this class we discussed about

 the preparation of consignments with normal loss
and abnormal loss

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Assignment:

 1000 toys were consigned by Sita & Co., of

Kanpur
 each costing Rs.300/- to his agent Nirmala &
Co of Nellore
 The Consignor paid
 Freight & Insurance Rs.23,000/-
 During the transit, 100 toys were totally
damaged by fire (not insured)
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Assignment contd.
Account sales received from Consignee showing
 800 toys sold @ Rs.440/-

 Consignee paid customs duty Rs.28,800/-

 Advance paid Rs.1,00,000/-

 Commission @ 5%

Prepare  Consignment a/c,

 Consignee a/c &

 Abnormal Loss a/c

CCP402.12 31