Credit Sales Consignment Debtors :: Collection by the Consignor

... From Page 12

   
 

There are a number of possible scenarios for collection of the amounts due from the consignment debtors. The dues are collected in general by the Consignee. Theoretically it is also possible that the dues are collected by the Consignor.

Dues Collected by the Consignor

In certain cases, the consignment debtor may pay the consignor directly when instructed/requested by the consignor/consignee. Though this is a rare occurence, it is a possibility. This payment also can be :
  • in Cash

  • by Cheque

  • by Making the Consignment Debtor accept a Bill Receivable drawn

    The Consignor may receive the dues of the Consignment Debtors by making them accept a Bill Receivable drawn by him.
  • by Receving an Endorsed Bill Receivable from the Consignment Debtor

    In some cases the consignment debtor may also endorse a bill received by him from some other party to the Consignor. The Consignment Debtor is called the endorser and the Consignor the Endorsee.
    [Bill Receivable with the Consignment Debtor gets liquidated and the Consignor receives a Bill Receivable]

    In both the cases of a B/R being accepted by the Consignment Debtor as well as a B/R in his possession being endorsed by him, the consignor would get a B/R. The acceptor in the first instance being the consignment debtor himself and in the second instance being some one else.

  • by Transfering a Bill Payable or any other liability to the Consignment Debtor

    Transfering a Bill Payable or any other liability of the Consignor (Bill Payable getting created to the Consignment Debtor and Bill Payable getting liquidated to the Consignor)

13. June 25th: For the amount received by the Consignor from the Consignment Debtors
      (a) in Cash Rs. 10,000 from M/s Swaraj Traders,
      (b) By Cheque Rs. 10,000 from M/s Irfan Brothers,
      (c) By a Bill Receivable accepted by M/s Swaraj Traders Rs. 4,500,
      (d) By a Bill Receivable Endorsed by M/s Irfan Brothers Rs. 8,000 and
      (e) By M/s Swaraj Traders taking over the liability of the consignor (Bills Payable) Rs. 4000.

Consignor's Books Hide/Show

Accounts Effected by the Transaction » Identification & Analysis:

  • Credit »

    • 13 (a), (c), (e): Consignment Debtors a/c

      In all these transactions, M/s Swaraj Traders, being the Consignment Debtors are clearing their dues. Hence their account which shows a debit balance is to be reduced by the amount. M/s Swaraj Traders are the benefit givers here.
      [Consignment Debtors a/c – Personal a/c – Credit the benefit giver]

      Consignment Debtors a/c is used if all the Consignment Debtors are recorded in the same account. Otherwise, the personal account relevant to the Consignment Debtor is used.

    • 12 (b), (d): Consignment Debtors a/c

      In these transactions, M/s Irfan Brothers, being the Consignment Debtors are clearing their dues. Hence their account which shows a debit balance is to be reduced by the amount. M/s Irfan Brothers are the benefit givers here.
      [Consignment Debtors a/c – Personal a/c – Credit the benefit giver]

      Consignment Debtors a/c is used if all the Consignment Debtors are recorded in the same account. Otherwise, the personal account relevant to the Consignment Debtor is used.

  • Debit »

    • 13 (a): Cash a/c

      Since cash is being received "Cash a/c" is debited
      [Cash a/c – Real a/c – Debit what comes in]
    • 13 (b): Bank a/c

      Since the money is getting into the bank account "Bank" is to be debited (Bank a/c is benefiting by receiving cash)
      [Bank a/c Personal a/c Debit the benefit receiver]
    • 13 (c), (d): Bills Receivable a/c

      When the Bill is accepted by the consignment Debtor and also when the Consignment Debtor endorses and transfers the bill receivable with him to the consignee, the consignee would receive a Bill Receivable. In the first bill the consignee being the drawer and in the second bill the consignee being the endorsee. Since the Bill receivable is getting in "Bills Receivable a/c" is debited
      [Bills Receivable a/c Real a/c Debit what comes in]
    • 13 (e): Bills Payable a/c

      When the Bill Payable with the consignee which is a liability is accepted to be taken over by the consignment debtor, it amounts to a liability in the name of "Bills Payable a/c" getting liquidated.

      Since the liability Bills Payable is being liquidates "Bills Payable a/c" is debited. The Bill Payable a/c being the benefit receiver here.
      [Bank a/c Personal a/c Debit the benefit receiver]

The effect of the transactions can be summarised as
13(a) :(i) Consignment Debtors a/c (Or) Consignee a/c and (ii) Cash a/c
13(b) :(i) Consignment Debtors a/c (Or) Consignee a/c and (ii) Bank a/c
13(c) :(i) Consignment Debtors a/c (Or) Consignee a/c and (ii) Bills Receivable a/c
13(d) :(i) Consignment Debtors a/c (Or) Consignee a/c and (ii) Bills Receivable a/c
13(e) :(i) Consignment Debtors a/c (Or) Consignee a/c and (ii) Bills Payable a/c

Consignee a/c instead of Consignment Debtors a/c

If at the time of recording the credit sale transactions, the "Consignee a/c" has been used instead of the "Consignment Debtors a/c", in recording these transactions also the "Consignee a/c" should be used in place of the "Consignment Debtors a/c".

 
DrConsignment Debtors a/c (Or) M/s Maruthi Traders a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




30/06/05
30/06/05
30/06/05
30/06/05
30/06/05
 

By Cash a/c (13a)
By Bank a/c (13b)
By B/R a/c (13c)
By B/R a/c (13d)
By B/P a/c (13e)
 






 

10,000
10,000
4,500
8,000
4,000
 
DrBills Receivable a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

30/06/05
30/06/05
 

To Con. Dr a/c (13c)
To Con. Dr a/c (13d)
 



 

4,500
8,000
 




DrBills Payable a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

30/06/05
 

To Con. Dr a/c (13e)
 


 

4,000
 




Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 15th Dr
10,000
10,000
June 30th Dr
10,000
10,000
June 30th Dr
4,500
4,500
June 30th Dr
8,000
8,000
June 30th Dr
4,000
4,000

Alternative_1

Since in the third and fourth entries, the same two accounts are debited and credited, the amounts in the two entries can be combined and only one entry in its place can be written.

Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 30th Dr
12,500
12,500

Combined Amounts vs Compound Entries:

This entry is not a Compound entry. It is just an entry obtained by combining amounts. This type of combination is possible where the account that is debited and the account that is credited in all the entries is the same. Though both compound entry and combined entry seem to be a replacement for two or more entries, there is a difference. In case of an entry obtained by combining just the amounts, the individual amounts relating to each entry would not be available. Only the total amount is visible both in the journal as well as the ledger. But in a compound entry, the amounts would be the same as in the case of the seperate entries.

Alternative_2

Since in all the entries, the same account is credited, all the entries can be combined together to form a "Simple Compound/Combined Entry". Similarly the second and the fourth entries can be combined together to form another "Simple Compound/Combined Entry".
  • Simple Compound/Combined Entry

    A simple compound/combined entry is an entry involving three or more elements/account heads and in which there are either multiple debits or multiple credits and not both. Learn more Here

 
Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 30th Dr
Dr
Dr
Dr




10,000
10,000
12,500
4,000




36,500

Consignees Books Hide/Show

 

Accounts Effected by the Transaction » Identification & Analysis:

  • Credit »

    • 13 (a), (b), (c), (d), (e): Consignor a/c

      The amount due to the consignee by the consignor would also get reduced on account of the consignment debtors directly paying to the consignor. That is the "Consignor" is receiving the benefit here. Since the consignee has to pay the consignor his account shows a debit balance. To reduce the amount due, the "Consignor a/c" is to be credited.
      [Consignor a/c – Personal a/c – Debit the benefit receiver]
  • Debit »

    • 13 (a), (c), (e): M/s Swaraj Traders a/c

      In all these transactions, M/s Swaraj Traders, being the Consignment Debtors are clearing their dues. Hence their account which shows a debit balance is to be reduced by the amount. M/s Swaraj Traders are the benefit givers here.
      [Consignment Debtors a/c – Personal a/c – Credit the benefit giver]

      Consignment Debtors a/c is used if all the Consignment Debtors are recorded in the same account. Otherwise, the personal account relevant to the Consignment Debtor is used.

    • 12 (b), (d): M/s Irfan Brothers a/c

      In these transactions, M/s Irfan Brothers, being the Consignment Debtors are clearing their dues. Hence their account which shows a debit balance is to be reduced by the amount. M/s Irfan Brothers are the benefit givers here.
      [Consignment Debtors a/c – Personal a/c – Credit the benefit giver]

      Consignment Debtors a/c is used if all the Consignment Debtors are recorded in the same account. Otherwise, the personal account relevant to the Consignment Debtor is used.

The effect of the transactions can be summarised as
13(a) :(i) Consignor a/c and (ii) Consignment Debtors a/c
13(b) :(i) Consignor a/c and (ii) Consignment Debtors a/c
13(c) :(i) Consignor a/c and (ii) Consignment Debtors a/c
13(d) :(i) Consignor a/c and (ii) Consignment Debtors a/c
13(e) :(i) Consignor a/c and (ii) Consignment Debtors a/c

 
DrM/s Innova Steels a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

25/06/05
25/06/05
25/06/05
25/06/05
25/06/05
 

To S T a/c (13a)
To I B a/c (13b)
To S T a/c (13c)
To I B a/c (13d)
To S T (13e)
 






 

10,000
10,000
4,500
8,000
4,000
 




DrM/s Swaraj Traders a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




25/06/05
25/06/05
25/06/05
 

By I S (13a)
By I S (13c)
By I S (13e)
 




 

10,000
4,500
5,000
 
DrM/s Irfan Brothers a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




25/06/05
25/06/05
 

By I S a/c (13b)
By I S a/c (13d)
 



 

10,000
8,000
 

Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 25th Dr
10,000
10,000
June 25th Dr
10,000
10,000
June 25th Dr
4,500
4,500
June 25th Dr
8,000
8,000
June 25th Dr
5,000
5,000

Alternative

Since in the first, third and the fifth entries the same accounts are debited and credited, all the entries can be combined together to form a single entry. Similarly the second and the fourth entries can be combined together to form another entry. The five entries above can be reduced to two entries by combining the ones that need the same accounts to be debited and credited.

Journal in the books of M/s __ for the period from ____ to _____
Date V/R
No.
L/F Debit Amount
(in Rs)
Credit Amount
(in Rs)
June 25th Dr
19,500
19,500
June 25th Dr
18,000
18,000

These entries cannot be called "Compound Entries" as they are obtained by just combining the amounts in the various transactions. The postings relating to the individual transactions would not be visible in this case.
DrM/s Innova Steels a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)

25/06/05
25/06/05
 

To S T a/c (13a/c/e)
To I B a/c (13b/d)
 



 

19,500
18,000
 




DrM/s Swaraj Traders a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




25/06/05
 

By I S (13a/c/e)
 


 

19,500
 
DrM/s Irfan Brothers a/cCr
Date Particulars J/F Amount
(in Rs)
Date Particulars J/F Amount
(in Rs)




25/06/05
 

By I S (13b/d)
 


 

18,000
 

Author Credit : The Edifier ... Continued Page 14

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