BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Detailed explanation-1: -When the del credere commission is provided to the consignee the bad debts are borne by him. Hence, it will be recorded in the books of consignee and will be debited to commission earned account as commission is paid to the consignee for covering the risk of bad debts.
Detailed explanation-2: -When the del credere commission is given, the consignee undertakes the risk of bad debts arising out of the credit sale.
Detailed explanation-3: -Therefore, whenever Del Credere commission is payable, the bad debts loss will be borne by consignee and not the consignor.
Detailed explanation-4: -Debtors account is debited when goods are sold, it will be credited in case of loss on account of bad debts. Consignor account cannot be debited as consignee is to bear the loss of bad debts because he is being given del credere commission. 1 Crore+ students have signed up on EduRev.
Detailed explanation-5: -So, when the del credere commission is allowed for bad debt, consignee will debit the bad debt amount to the commission earned account as it is his expenses which he will write off against related income i.e. commission earned.