Question

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

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

Answer 1

Answer: (B)

At Invoice value less stock reserve

The consignment stock shall be recorded at invoice value reduced by stock reserve.

The Stock on consignment a/c would show the value at cost if the balance in the stock reserve account is transferred to it, thereby closing the reserve account.

The following is an example: Stock Reserve a/c To Stock on Consignment a/c	Dr	4,000	4,000
[For the reserve for the unrealized profit]

Stock Reserve a/c

Dr Cr
Particulars	Amount	Particulars	Amount
To Stock on Consignment a/c	4,000	By Consignment a/c	4,000
	4,000		4,000

This would close the stock reserve account.

Stock on Consignment a/c

Dr Cr
Particulars	Amount	Particulars	Amount
To Consignment a/c	40,000	By Stock Reserve a/c By Balance c/d	4,000 36,000
	40,000		40,000
To Balance b/d	36,000

Balance Sheet

Liabilities	Amount (value)	Assets	Amount (value)
		Stock on Consignment	36,000

With respect to the information in the balance sheet, this would be the same as recording the stock on consignment at cost.

In problem-solving and some times in manual accounting, the stock reserve is shown as a deduction from the Stock on Consignment on the assets side of the balance sheet, thereby providing the information relating to both the invoice value and cost value of the stock on consignment.

Balance Sheet

Liabilities	Amount (value)	Amount (value)	Assets	Amount (value)	Amount (value)
			Stock on Consignment (−) Stock Reserve	40,000 4,000	36,000