Name items which are recorded at the invoice price in the Consignment Account. Give journal entries passed for the adjustment of loading in respect of each item.

Items Recorded at Invoice Price in the Consignment Account

In consignment accounting, goods are sent by the consignor to the consignee for the purpose of sale. These goods are often recorded at the invoice price rather than the actual cost price. The invoice price includes the cost plus a markup (known as loading) to ensure that profit is built into the price. This approach helps maintain consistency and protect trade margins during transactions.

Items Recorded at Invoice Price

The following items are typically recorded at invoice price in the consignment account:

• Goods Sent on Consignment – These are recorded at invoice price in the Consignment Account.
• Goods Returned by Consignee – Also recorded at invoice price if goods are unsold or damaged and returned.
• Closing Stock with Consignee – The unsold goods with the consignee at the end of the accounting period are recorded at invoice price.

Understanding Loading

Loading is the excess of the invoice price over the cost price. For example, if goods costing ₹1,000 are invoiced at ₹1,200, the loading is ₹200. It is added to cover profit margins. Since the Consignment Account should reflect the actual profit or loss, loading must be removed (adjusted) from the accounts through journal entries.

Journal Entries for Adjustment of Loading

Let us now look at the journal entries that are passed to remove loading from each item:

1. For Goods Sent on Consignment

At the time of sending goods:

Consignment A/c     Dr.       (Invoice Price)
   To Goods Sent on Consignment A/c

To adjust loading:

Goods Sent on Consignment A/c    Dr.  
   To Consignment A/c                            (Loading Amount)

This removes the excess amount (loading) from the consignment account.

2. For Closing Stock with Consignee

Stock is first recorded at invoice price:

Closing Stock A/c     Dr.
   To Consignment A/c             (Invoice Price of closing stock)

Then loading in the closing stock is adjusted:

Consignment A/c      Dr.
   To Stock Reserve A/c              (Loading included in closing stock)

3. For Goods Returned by Consignee

If goods are returned, they are initially recorded at invoice price:

Goods Sent on Consignment A/c     Dr.
   To Consignment A/c

To adjust loading on returned goods:

Consignment A/c      Dr.
   To Goods Sent on Consignment A/c

Summary Table

Conclusion

Recording goods at invoice price helps to keep track of profit margins, but for accurate accounting, loading must be adjusted properly. The journal entries shown above ensure that the consignment account reflects the true cost and profit. This way, the financial statements remain reliable and free from inflation due to overstatements.