AFA test question Paper to be held on 23rd July 2023 at 9 am.
Question Paper Pattern for the AFA test. Total for 20 marks
Section A 2*2=4
Answer any two question out of 4 questions.
Questions are asked from Consignment accounts and Royalty accounts.
Section B 2*8=16
Answer any two questions out of 3 questions.
Questions are asked from Consignment accounts and Royalty accounts and Conversion of Firm into a Ltd Company.
What is co
nsiQgnment accounting?
What is the difference between consignor and consignee?
What are
What is consignment accounting?
What is the difference between consignor and consignee?
What are the features of consignment accounting?
What are the accounting entries made in consignment accounting?
What is account sale in consignment accounting?
What is Del-Credere commission in consignment accounting?
How is normal loss treated in consignment accounting?
How is abnormal loss treated in consignment accounting?
What is overriding commission in consignment accounting?
Consignment accounting is a specialized form of accounting that deals with the process of sending goods from one party, known as the consignor, to another party, known as the consignee, for the purpose of sale. The consignor retains ownership of the goods until they are sold, and the consignee acts as an agent to sell the goods on behalf of the consignor.
The consignor is the party who owns the goods and sends them to the consignee for sale. The consignee, on the other hand, is the party who receives the goods from the consignor and undertakes the responsibility of selling them. The consignee does not own the goods but acts as a mediator between the consignor and the end customers.
The features of consignment accounting include tracking and recording of goods sent on consignment, maintaining separate accounts for consignor and consignee, calculating and settling commissions for the consignee, handling sales and unsold goods, and addressing any losses or damages during the consignment period.
In consignment accounting, the following accounting entries are typically made: a. When goods are sent on consignment: Consignment Outward (Debit) - To record the value of goods sent to the consignee. Consignment Inventory (Credit) - To record the value of goods still owned by the consignor. b. When the consignee makes a sale: Consignment Inventory (Debit) - To reduce the value of goods owned by the consignor. Consignment Sales (Credit) - To record the revenue generated from the sale. c. When the consignee incurs expenses or commission: Consignment Expense (Debit) - To record any expenses incurred by the consignee. Consignment Commission (Credit) - To record the commission payable to the consignee.
Account sale in consignment accounting refers to a statement provided by the consignee to the consignor showing details of the sales made, commissions earned, expenses incurred, and the resulting net amount due to the consignor. It acts as a settlement report between the two parties.
Del-Credere commission in consignment accounting is an additional commission paid by the consignor to the consignee for taking on the responsibility of guaranteeing the payment from the customers. In essence, the consignee assumes the credit risk of the customers and earns a higher commission rate for this service.
Normal loss in consignment accounting refers to the expected and acceptable loss of goods during the consignment period, which is a common occurrence in certain industries. It is treated as an expense and borne by the consignor.
Abnormal loss in consignment accounting is an unforeseen or unusual loss of goods during the consignment period, beyond the normal loss. It is usually borne by the consignor as well, but depending on the circumstances, it may be shared between the consignor and consignee as per their agreement.
Overriding commission in consignment accounting is an additional commission paid to a third party, usually a sales agent or intermediary, for securing the sale of consigned goods to specific customers. This commission is over and above the regular consignee's commission and is paid by the consignor.
Royalty accounting is a specialized financial process that involves the calculation and payment of royalties to rights holders, usually in the context of intellectual property or natural resource extraction. It ensures that the rightful owners receive their agreed-upon share of revenue or profits generated from the use of their assets or resources.
Minimum rent in royalty accounting refers to a fixed amount that the licensee must pay to the licensor regardless of the level of sales or usage of the licensed property. Royalty, on the other hand, is a percentage-based payment made to the licensor based on the sales or usage of the licensed property.
Short-working in royalty accounting occurs when the actual royalty paid by the licensee falls short of the minimum rent or the expected amount owed to the licensor. It signifies that the agreed-upon minimum payment has not been met and may result in further financial obligations from the licensee.
Normal loss in royalty accounting refers to the usual or expected loss that occurs during the production or extraction process, and it is typically accounted for as a part of regular business operations. Abnormal loss, however, is an unexpected or unusual loss that deviates from the standard operations and may require additional scrutiny in royalty calculations.
Recoupment of short-working in royalty accounting involves the process of recovering the shortfall amount from future royalty payments. When the licensee has paid less than the agreed minimum rent, the licensor may allow the licensee to make up for the deficit in subsequent royalty payments.
The features of royalty accounting include accurate tracking and reporting of sales or usage data, meticulous calculation of royalties based on contractual terms, management of minimum rent and short-working provisions, handling of normal and abnormal losses, and implementing processes for recoupment and dispute resolution to ensure a fair and transparent financial arrangement between licensors and licensees.
sum no 21 no change.
the feature
s of consignment accounting? What are the accounting entries made in consignment accounting? What is account sale in consignment accounting? What is Del-Credere commission in consignment accounting? How is normal loss treated in consignment accounting? How is abnormal loss treated in consignment accounting? What is overriding commission in consignment accounting?
What is cWhat is consignment accounting?
What is the difference between consignor and consignee? What are the features of consignment accounting? What are the accounting entries made in consignment accounting? What is account sale in consignment accounting? What is Del-Credere commission in consignment accounting? How is normal loss treated in consignment accounting? How is abnormal loss treated in consignment accounting?What is overriding commission in consignment accounting?onsignment accounting? What is the difference between consignor and consignee? What are the features of consignment accounting? What are the accounting entries made in consignment accounting? What is account sale in consignment accounting? What is Del-Credere commission in consignment accounting? How is normal loss treated in consignment accounting? How is abnormal loss treated in consignment accounting? What is overriding commission in consignment accounting?
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