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Question
Which of the following entry will be passed in the books of Consignor for recording bad debts if del-credere is allowed to Consignee?
A. Bad Debts A/c
To Consignment Debtors A/c
Dr. B. Bad Debts A/c
To Profit & Loss A/c
Dr. C. Bad Debts A/c
To Consignee A/c
Dr. D. No entry is required to be passed
Which of the following entry will be passed in the books of Consignor for recording bad debts if del-credere is allowed to Consignee?
| A. Bad Debts A/c To Consignment Debtors A/c | Dr. |
| B. Bad Debts A/c To Profit & Loss A/c | Dr. |
| C. Bad Debts A/c To Consignee A/c | Dr. |
| D. No entry is required to be passed |
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Solution
The correct option is D D
The consignor allows ordinary commission to the consignee for selling goods on behalf of the consignor when the consignee does not take any responsibility for the bad debts that may arise. However, when the consignee takes responsibility for the bad debts that may arise, he is allowed a commission over and above the ordinary commission, called del credere commission. In such a case, since the consignor has no responsibility for the bad debts, no entry is required to be passed in his books for recording bad debts.
The consignor allows ordinary commission to the consignee for selling goods on behalf of the consignor when the consignee does not take any responsibility for the bad debts that may arise. However, when the consignee takes responsibility for the bad debts that may arise, he is allowed a commission over and above the ordinary commission, called del credere commission. In such a case, since the consignor has no responsibility for the bad debts, no entry is required to be passed in his books for recording bad debts.
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