Deferred Revenue Expenditure Capital Expenditure Capital Gain Revenue Expenditure
A Consignment Account is a Nominal Account. It is classified as a nominal A/c because it is prepared to ascertain the profit earned or loss incurred on the consignment. The accounting rule applied to consignment A/c: Debit all Expenses & Losses and Credit all Incomes & Gains. As per the modeRead more
A Consignment Account is a Nominal Account. It is classified as a nominal A/c because it is prepared to ascertain the profit earned or loss incurred on the consignment.
The accounting rule applied to consignment A/c: Debit all Expenses & Losses and Credit all Incomes & Gains.
As per the modern rules, there is no clear-cut classification of consignment A/c. It is prepared from the perspective of the consignor, hence it cannot be outrightly classified as an expense/revenue.
In the context of accounting, consignment refers to an arrangement of goods wherein the consignor sends the goods to the consignee so that the consignee can sell/distribute the goods on behalf of the consignor.
The relationship between the consignor and consignee is that of a principal and agent. The consignee gets a commission for his services.
You should keep in mind that the consignee does not get ownership of the goods even though the goods are in his possession. The ownership remains with the consignor till the sale is made. On sale, the buyer will become the owner.
A Consignment A/c is an account prepared to record the transactions happening in a consignment business. This account is maintained by the consignor. It shows the profit earned or loss incurred by the consignor on a specific consignment.
A consignor may send goods to more than one consignee. In such a case, a separate consignment A/c is prepared for each consignment.
The following items appear on the debit side of the consignment A/c:
- Cost of goods sent on consignment.
- Expenses incurred by the consignor (freight, insurance, etc.)
- Expenses paid by the consignee (storage and warehousing, marketing expenses, packaging and selling expenses, etc.)
- Bad debts in consignment.
- Commission paid to consignee.
The entries appearing on the credit side of the consignment A/c are as follows:
- Gross sales.
- Abnormal loss of goods.
- Inventories on consignment (stock in transit).
The balance in the consignment A/c represents the profit or loss made on the consignment. It is transferred to the P&L A/c and the account is closed.
Below is the format for Consignment A/c:
The correct answer is 4. Revenue Expenditure. Depreciation is a non-cash expense and is charged on the fixed asset for its continuous use. Revenue expenditure is a day-to-day expense incurred by a firm in order to carry on its normal business. Depreciation is considered a revenue expense due to theRead more
The correct answer is 4. Revenue Expenditure.
Depreciation is a non-cash expense and is charged on the fixed asset for its continuous use. Revenue expenditure is a day-to-day expense incurred by a firm in order to carry on its normal business. Depreciation is considered a revenue expense due to the regular use of the fixed assets.
Depreciation is the systematic and periodic reduction in the cost of a fixed asset. It is a non-cash expense. Mostly, depreciation is charged according to the straight-line method or written down method as per the policy of the company.
Depreciation is the systematic and periodic reduction in the cost of a fixed asset. It is a non-cash expense. Mostly, depreciation is charged according to the straight-line method or written down method as per the policy of the company. It is calculated as-
Depreciation = Cost of the asset – Scrap value / Expected life of the asset.
For Example, ONGC bought machinery at the beginning of the year for Rs 10,00,000
It charges depreciation @10% at the end of the year.
10,00,000 x 10/100 = 1,00,000 will be depreciation for the year and will be shown on the debit side of Profit & Loss A/c.
As the fixed assets are used in the day-to-day activities of the firm and hence the depreciation charged on it on the daily basis would be revenue in nature. so depreciation is said to be an item of revenue expenditure.
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