Sale Of Goods On Approval Or Return Basis

Goods pending approval or return as on the last day of the accounting year are valued at cost price. This means that the value assigned to these goods is the original purchase price or production cost. This is because the goods have not yet been approved for sale or returned to the supplier, so their selling price, average price, or latest price is not relevant for valuation purposes. Therefore, the cost price is the appropriate value to assign to these goods.

The stock on approval will be shown in the balance sheet at Rs. 2,700 because the goods that were not returned or approved by B are still considered as part of the inventory. The cost of these goods is not affected by the profit margin, so it remains at the original cost of Rs. 2,700.

The correct answer is Rs. 4000. This is because the sales of goods on "Sale on approval" basis for which consent of the customer was not received are not considered as actual sales until the customer gives their consent. Therefore, the value of the goods sent on approval, which includes profits at 25% on cost, should not be included in the stock. Hence, the stock on approval will be Rs. 4000.

The correct answer is Rs.16,000. This is because the sale price of each article was recorded as 200, which is the cost price plus 25%. Therefore, the cost price of each article would be 200/1.25 = 160. Since 100 articles were sent on approval, the total cost of the stock on approval would be 160 * 100 = Rs.16,000.

When goods are sent on sale on approval basis, they are not considered as actual sales until the customer decides to keep them. Therefore, the profit should not be included in the sales. Since the profit included in the sales was 20% on cost, this means that the cost of the goods is 80% of the sales price. So, if the sales price is Rs. 600, the cost of the goods would be Rs. 600 * 80% = Rs. 480. Therefore, the increase in closing stock would be Rs. 600 - Rs. 480 = Rs. 120. However, the question asks for the increase in closing stock in terms of the original cost, so we need to calculate 80% of Rs. 120, which is Rs. 96. Therefore, the correct answer is Rs. 500.

Since the goods sold on approval or return basis are included in the Sales Book, it means that they are considered as sales. Therefore, the profit included in the sales will also be included in the calculation. As the profit is at 25% on cost, it means that the cost of the goods sold on approval or return basis is Rs.20,000 (25% of Rs.25,000). At the year end, the closing stock will increase by the cost of the goods sold on approval or return basis, which is Rs.20,000.

The cost of goods lying with the customers will be Rs.1,10,000. This is because the two cars were sent on a 'sale or return' basis, meaning they were not actually sold but are still considered as sales for accounting purposes. The cost of each car was Rs.55,000, but they were debited to the customers at Rs.75,000 each. Therefore, the cost of goods lying with the customers is the total cost of the cars, which is 2 cars x Rs.55,000 = Rs.1,10,000.

The cost price of the un-approved goods with the dealer will be Rs.32,000. This can be calculated by subtracting the profit from the approved goods from the total cost of the goods sent out. The profit on the approved goods is 25% of Rs. 80,000, which is Rs. 20,000. Therefore, the cost of the approved goods is Rs. 80,000 - Rs. 20,000 = Rs. 60,000. Since the total cost of the goods sent out is Rs. 1,20,000, the cost of the un-approved goods is Rs. 1,20,000 - Rs. 60,000 = Rs. 60,000. Hence, the cost price of the un-approved goods with the dealer is Rs. 32,000.

The profit included in the sales is 20% on the cost stock. This means that the profit earned on the goods sent on approval or return basis is 20% of the cost price. The party will increase the closing stock by Rs.25,000. Therefore, the profit included in the sales will be 20% of Rs.25,000, which is equal to Rs.5,000. Hence, the correct answer is Rs.25,000.

The correct answer is "No entry is required for receiving the letter of approval from the customer." This is because when goods are sent on a sale or return basis, they are recorded as a sale at the time of sending it for approval. Therefore, the letter of approval from the customer does not require any additional entry as the sale has already been recorded.

The cash received from debtors during the year can be calculated by subtracting the outstanding debtors at the end of the year from the total sales. In this case, the outstanding debtors at the end of the year are Rs.30,000. Therefore, the cash received from debtors during the year will be Rs.1,00,000 - Rs.30,000 = Rs.70,000.

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The correct answer is Rs. 10,000. Since no confirmation has been received from Annu Ltd. by 31st March, 2006, the goods sent to them on sale or return basis should be treated as closing stock. Therefore, the value of the goods, which is Rs. 10,000, should be shown as closing stock in the balance sheet of ABC Ltd. on 31st March, 2006.

The debtors at the end will be Rs.30,000. This can be calculated by subtracting the cash received from debtors (Rs.30,000) and the bad debts (Rs.7,000) from the opening debtors (Rs.50,000). Additionally, the bills received from customers (Rs.15,000) are not considered as cash received, so they are not deducted. Therefore, the remaining amount is Rs.30,000.

The cost of goods lying with customers should be Rs. 6,000. This is because the goods that were returned and taken into stock at a cost of Rs. 8,000 were not recorded in the accounts. Therefore, the cost of these goods should not be included in the calculation. The remaining parcel of goods worth Rs. 12,000 (costing Rs. 6,000) is still on approval and has not expired on the closing date. Hence, the cost of goods lying with customers is Rs. 6,000.