Question

Consignment stock will be recorded in the balance sheet of Consignor on asset side at _____________.

• A. Invoice value
• B. Invoice value less stock reserve
• C. Lower than cost price
• D. $10\%$ lower than invoice value

Answer 1

Answer: (B)

Invoice value less stock reserve

Consignment stock is an asset that belongs to the consignor and hence, shown on the asset side of the balance sheet of the consignor, prepared at the end of a period. The consignment stock which remains unsold in the hands of the consignee will be shown as an asset in the balance sheet at invoice value less stock reserve. Invoice value is the value at which the consignor supplies such stock to the consignee by adding his share of profit to the cost in the proforma invoice. The consignor directs the consignee to sell such stock at the given invoice value without revealing his profit margin. So, when the goods remain unsold, the consignor records them as stock in the asset side of the balance sheet by reducing the invoice value by profit margin or the stock reserve.