• 1 Marks

FA – May 2014 – L1 – SA – Q12 – Accounting for Inventories (IAS 2)

Identifies the accounting treatment for losses or stolen goods on consignment.

What are the accounting entries on consignment for stolen or lost goods?
A. Debit- Consignment Account; Credit- Profit or Loss or Insurance Account, if insured
B. Debit- Profit or Loss or Insurance Account, if insured; Credit- Consignment Account in the consignor’s ledger
C. Debit- Cash Account; Credit- Consignment Account
D. Debit- Goods in Transit Account; Credit- Consignment Account in consignee’s ledger
E. Debit- Consignment Accounts; Credit- Insurance Accounts

B

Explanation:
The correct answer is B because when goods on consignment are lost or stolen, the loss is recorded by debiting the Profit or Loss or Insurance Account (if insured) and crediting the Consignment Account in the consignor’s ledger. This reflects the reduction in the value of consigned goods and properly accounts for the financial impact.

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