A Tempo at 8:50 p.m.
Rajesh is the receiving clerk at a family-run garment store in Cuttack that stocks school uniforms and men's casual wear. On 12 June a supplier's tempo arrives at 8:50 p.m., twenty minutes before closing. The invoice, dated 12 June, lists 24 cartons containing 240 shirts at ₹310 each, total ₹74,400, with terms "3/10, net 30". The delivery person still has two drops to make and asks Rajesh to sign the invoice as "received in good condition" so he can leave. Rajesh counts 12 cartons and finds 232 shirts. One carton is damp at the bottom; the shirts inside smell of moisture and have faint grey patches. Two cartons are still unopened. The store's stock register has not been updated since 9 June because the accountant is on leave, and the manager has already left and is not answering calls.
1. What should Rajesh do in the next 30 minutes, in order? Explain the risk of each shortcut the delivery person is proposing.
Read the worked answer
- Refuse to sign "received in good condition". Sign only a qualified remark: "24 cartons received; contents not verified; one carton damp; shortage found on part count; subject to joint verification." Signing clean transfers the risk to the store.
- Count every carton in the delivery person's presence, including opening the two unopened cartons and the damp one now. A count done after the vehicle leaves cannot be proved.
- Photograph the damp carton and the affected shirts before anything is moved. This is the evidence for a transport-damage claim.
- Record the vehicle number, driver's name, and in/out times in the inward/gate register.
- Get the delivery person to sign the discrepancy statement and give him a copy; if he refuses, note the refusal in writing.
- Quarantine the damp shirts in a separate marked location. Never shelve them: moisture and grey patches turn into fungus that spreads to dry stock in a closed cupboard.
- Prepare a GRN for the accepted quantity only, and send the manager a written message with the figures that night.
Risks of the shortcuts: signing "in good condition" destroys the store's right to claim roughly ₹8,680 later, and the shortfall will be written off as unexplained shrinkage. Delaying the count to tomorrow means the store can no longer prove the shortage did not happen in its own godown. Accepting the whole invoice into the stock register inflates stock on paper and produces a phantom shortage at month end.
2. How should the eight missing shirts and the damp carton be documented, and what entries follow in the stock register and the supplier ledger? Assume 20 of the 232 shirts are rejected as damaged.
Read the worked answer
The numbers: invoiced 240; physically received 232; of these, 20 rejected as damp and damaged; accepted for sale = 212 shirts at ₹310 = ₹65,720. Discrepancy to be claimed = 8 short + 20 damaged = 28 shirts × ₹310 = ₹8,680.
Documents:
- Goods Received Note (GRN) showing invoiced quantity, received quantity, rejected quantity and accepted quantity, signed by Rajesh.
- Discrepancy / short-supply report with photographs and the driver's signature or refusal note.
- Debit note raised on the supplier for ₹8,680.
- Purchase return entry for the 20 damaged shirts, which go back with the next vehicle or are scrapped with the manager's written approval.
Stock register:
- Credit the supplier and increase stock by the accepted 212 shirts only (₹65,720).
- Record date received, supplier name, invoice number, quantity, rate and the GRN number, so the movement is traceable.
- Keep the 20 damaged shirts in a "quarantine/not for sale" line, not in saleable stock; the 8 missing shirts never enter stock at all.
Supplier ledger in accounts:
- Credit the supplier ₹65,720, not ₹74,400.
- The debit note reduces the payable by ₹8,680; if payment has already gone out, it becomes an amount recoverable from the supplier.
Reasoning: purchasing only what physically arrived keeps the stock ledger and the physical shelf in step; the three-day gap in posting is itself a control weakness, because unrecorded receipts are exactly how goods go missing without a trace.
3. If the store pays on 20 June, what should it pay, and what must happen before the payment is released?
Read the worked answer
The arithmetic:
- Accepted goods: 212 shirts × ₹310 = ₹65,720.
- Terms 3/10, net 30, from invoice date 12 June, means a 3% discount is available up to 22 June; payment on 20 June qualifies.
- Discount: 3% of ₹65,720 = ₹1,971.60.
- Amount payable = ₹63,748.40.
What must happen first:
- The debit note of ₹8,680 must be sent to the supplier and ideally acknowledged, so that the short payment is understood as an adjustment and not taken as a default.
- The GRN, discrepancy report and photographs should be on file; without them the supplier can and will dispute the deduction.
- The manager must approve the payment, because the amount differs from the invoice.
Judgement on the discount: 3% saved over roughly 20 days is a very high effective annual rate of return (well over 50% annualised). If the store has the cash, taking the discount is clearly worth it. If paying early means borrowing at, say, 14% a year, the discount still wins. The real constraint is cash availability in the last week of the month, when school-uniform demand ties up money in stock.
Reasoning: never pay the gross invoice after rejecting goods; and never take a discount on disputed value without first documenting the deduction.