Question

Mr. Ganesh sends out goods on approval to few customers and includes the same in the Sales Account. On 31.03.2018, the Trade Receivables balance stood at Rs.75,000 which included Rs. 6,500 goods sent on approval against which no intimation was received during the year. These goods were sent out at 30% over and above cost price and were sent to Mr. Adhitya at Rs.3,900 and Mr. Bakkiram at Rs.2,600. Mr.Adhitya sent intimation of acceptance on 25th April, 2018 and Mr. Bakkiram returned the goods on 15th April, 2018. Make the adjustment entries and show how these items will appear in the Balance Sheet as on 31st March, 2018. Show also the entries to be made during April, 2018. Value of Closing Inventories as on 31st March, 2018 was Rs.50,000.​

Answer 1

Answer:

Explanation:

In the Books of Mr. Ganesh

Journal Entries

Date                                    Particulars  

L.F.      Dr.             Rs.         Cr. Rs.

2018 Sales A/c Dr.  6,500  

March 31 To Trade receivables A/c(Being the cancellation of original entry for sale )                                     6,500

March 31 Inventories with Customers on Sale or Return A/c

To Trading A/c(Note 1)

(Being the adjustment for cost of goods lying with customers awaiting approval)                          Dr.  5,000 5,000

April 25 Trade receivables A/c

To Sales A/c

(Being goods costing worth Rs. 3,900 sent to Mr. Aditya on sale or return basis has been accepted by him)

Dr.   3,900  

                                       3,900

Balance Sheet of Mr. Ganesh as on 31st March, 2018

Liabilities           Rs.                                       Assets Rs. Rs.

Trade receivables(Rs. 75,000−Rs. 6,500)  68,500

Inventories-in trade 50,000  

Add: Inventories with customers on Sale or Return 5,000 55,000

                                                                                                     1,23,500

Notes:

(1) Cost of goods lying with customers=100/130×6,500=Rs. 5,000