Accounting Assignments Help

Q1: Credit Invoice for Returned Sale

• Sale amount: INR 1,200,000

• Contribution margin: 40% (means variable cost is 60%)

• Customer returned goods due to rust; sale needs to be credited.

Accounting treatment:

• Debit Sales Return (or Sales) by INR 1,200,000 (reduce revenue)

• Credit Accounts Receivable by INR 1,200,000 (reverse amount receivable)

Regarding Cost of Goods Sold (COGS) and Inventory:

• Since contribution margin is 40%, cost = 60% of sales = 0.6 × 1,200,000 = INR 720,000

• Reverse COGS: Debit Inventory by 720,000

• Credit COGS by 720,000

Summary Journal Entries:

Q2: Goods Ordered but Partial Shipment Received

• Order amount: INR 50,000,000

• Three shipments: each ~16,666,667

• Two shipments received; third shipment at sea expected May 5, 2022

• Payment on receipt of all goods.

Presentation in April 2022 Monthly Report:

• Record only goods physically received (two shipments):
  Inventory and Purchase expense = 2 × 16,666,667 = INR 33,333,334

• Third shipment is in transit, so under Goods-in-Transit, it should be disclosed in notes, not yet recorded in inventory or purchases.

Summary:

• Inventory includes two shipments only.

• Disclosure of third shipment under transit assets or notes.

• No liability recorded since payment is only on receipt of all goods.

Q3: Recovery from Bad Debts after Bankruptcy

• Overdue receivable: INR 1,000,000

• Provision for bad debts made earlier: INR 1,000,000

• Received INR 400,000 from bankruptcy estate.

Accounting treatment:

• When the receivable was written off:
  Debit Bad Debt Expense 1,000,000
  Credit Provision for Bad Debts 1,000,000 (assuming provision was already created)

• Now receiving 400,000:
  Debit Cash/Bank 400,000
  Credit Bad Debt Recovery (Other Income) 400,000

Presentation:

• Net bad debts in monthly report reflect only 600,000 loss (original 1,000,000 less 400,000 recovery)

• Cash inflow of 400,000 reported as income.

Q4: Steps to Calculate Inventory for Monthly Report

1. Physical Stock Counting:
   Conduct a physical count of goods at month-end or use reliable perpetual inventory system data.

2. Valuation:
   Apply the chosen inventory valuation method (FIFO, LIFO, Weighted Average, etc.).

3. Include Goods in Transit:
   Include goods shipped to you and in transit if legal ownership has passed.

4. Exclude Consignment Goods:
   Do not include goods held on consignment.

5. Check for Obsolescence:
   Adjust inventory for damaged, obsolete, or slow-moving items.

6. Apply Lower of Cost or Net Realizable Value (NRV):
   Inventory should be valued at the lower of cost or NRV as per accounting standards.

7. Prepare Inventory Valuation Summary:
   Summarize quantity × unit cost for all inventory items.

8. Disclosure:
   Mention the valuation method and any significant adjustments in notes.