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Sir can you please help me in these problems
Sir if control of inventory is transfered to the consignee than why is it still a consignment arrangement?
And sir accounting or journal entries for consignment is examinable in FR or not..
And Sir how can we recognize in consignment that the control is transfered to dealer or not?
Please help me sir in regard..
Thanks in advance sirI don’t think journal entries for consignment are examinable in FR. However, MCQs can be asked in either Section A or B where, based on a given scenario, you’ll have to identify whether or not revenue should be recognised (i.e whether or not control is transferred).
Identifying whether or not control is transferred depends primarily on who bears the risk and rewards related to the inventory. If the risk and rewards are still borne by shipper/consignor, then no sale took place hence no revenue can be recognised.
Risks include obsolescence and slow moving inventory. If the price of inventory decreases due to either of these risks, who will bear the additional loss?
Similarly, if the price of inventory increases for any reason while the goods are still at consignee’s premises, who’ll benefit from it?These are the questions which will determine whether or not control is transferred to the consignee.
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