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On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.?
Most Upvoted Answer
On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with cus...
Adjustment Entries for Goods Sold on "Sale to Return" Basis
Assuming the goods were sent on approval at a profit of cost plus '10%', and the present market price is '20%.' less than the cost price, the following adjustment entries need to be passed:
1. Reversal of Actual Sales Entry:
Debit: Sales Account - Rs. 3,000
Credit: Anu's Account - Rs. 3,000
2. Creation of Sales Return Entry:
Debit: Anu's Account - Rs. 3,000
Credit: Sales Return Account - Rs. 3,000
3. Adjustment for Cost Plus 10% Profit:
Debit: Anu's Account - Rs. 3,300 (3,000 + 10% of 3,000)
Credit: Inventory Account - Rs. 3,300 (Cost Price of Goods)
4. Adjustment for Present Market Price:
Debit: Provision for Loss Account - Rs. 660 (20% of Cost Price of Goods)
Credit: Inventory Account - Rs. 660
Explanation:
1. Reversal of Actual Sales Entry:
As the customer did not give consent, the actual sales entry needs to be reversed.
2. Creation of Sales Return Entry:
Since the goods were sold on "Sale to Return" basis, a sales return entry needs to be created to reflect the return of goods.
3. Adjustment for Cost Plus 10% Profit:
As the goods were sent on approval at a profit of cost plus 10%, the customer's account needs to be debited with the cost plus 10% profit and the inventory account needs to be credited with the cost price of goods.
4. Adjustment for Present Market Price:
As the present market price is 20% less than the cost price, a provision for loss needs to be created by debiting the provision for loss account and crediting the inventory account.
Conclusion:
By passing the above adjustment entries, the financial statements will reflect the correct position of the company's accounts, and the inventory will be adjusted for the loss incurred.
Assuming the goods were sent on approval at a profit of cost plus '10%', and the present market price is '20%.' less than the cost price, the following adjustment entries need to be passed:
1. Reversal of Actual Sales Entry:
Debit: Sales Account - Rs. 3,000
Credit: Anu's Account - Rs. 3,000
2. Creation of Sales Return Entry:
Debit: Anu's Account - Rs. 3,000
Credit: Sales Return Account - Rs. 3,000
3. Adjustment for Cost Plus 10% Profit:
Debit: Anu's Account - Rs. 3,300 (3,000 + 10% of 3,000)
Credit: Inventory Account - Rs. 3,300 (Cost Price of Goods)
4. Adjustment for Present Market Price:
Debit: Provision for Loss Account - Rs. 660 (20% of Cost Price of Goods)
Credit: Inventory Account - Rs. 660
Explanation:
1. Reversal of Actual Sales Entry:
As the customer did not give consent, the actual sales entry needs to be reversed.
2. Creation of Sales Return Entry:
Since the goods were sold on "Sale to Return" basis, a sales return entry needs to be created to reflect the return of goods.
3. Adjustment for Cost Plus 10% Profit:
As the goods were sent on approval at a profit of cost plus 10%, the customer's account needs to be debited with the cost plus 10% profit and the inventory account needs to be credited with the cost price of goods.
4. Adjustment for Present Market Price:
As the present market price is 20% less than the cost price, a provision for loss needs to be created by debiting the provision for loss account and crediting the inventory account.
Conclusion:
By passing the above adjustment entries, the financial statements will reflect the correct position of the company's accounts, and the inventory will be adjusted for the loss incurred.
Community Answer
On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with cus...
1) sales to anu= 3000 (being cancellation of goods sold on approval basis)
2) stock with customer to trading a/c - 2182
working notes
- cp -100
profit-10%
sp-110
therefore, cp 100. x
sp. 110. 3000
cp= 2727.2727.....~ 2727
market price 20% less than CP
mp= 2727 - (2727× 20%)
mp= 2182~
2) stock with customer to trading a/c - 2182
working notes
- cp -100
profit-10%
sp-110
therefore, cp 100. x
sp. 110. 3000
cp= 2727.2727.....~ 2727
market price 20% less than CP
mp= 2727 - (2727× 20%)
mp= 2182~
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On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.?
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On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.?.
On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for On 31.12 .2005 goods sold at sales price Rs. 3,000 were lying with customer Anu to whom they were sold on "Sale to Return' basis and recorded as actual sales. Since no consent has been received from customer, you are required to pass adjustment entries presuming goods were sent on approval at a profit of cost plus '10%' Present market price is '20%.' less than the cost price.?.
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