Question

28
Sent to Sagar Outward Invoice for goods supplied by Shekhar. at list price less 10% Trade
Discount​

Answer 1

Answer:

Purchased goods from dinesh worth rupees 50000.,10%trade discount and 5%cash discount.Half of the amount paid to him immidiately journal entry"

This transaction affects four accounts.. Purchases account (Goods are Purchased) ,Dinesh account (purchased from Dinesh), Cash account (half of the amount is paid in cash), cash Discount recieved (Discount being received)

Trade Discount is not recorded in the books of accounts unlike cash Discount..it is deducted from the List price and net price is considered to be the historical price of that product...

Trade Discount rate = 10%

List Price= 50000

Trade Discount amount = 50000 × 10% = 5000

Actual Price= List price - Trade Discount amount

= 50000 - 5000 = 45000

out of 45000.. 22500 is paid out in cash and rest on credit...

cash Discount= 5%

Cash Discount amount= 22500 × 5% = 1125

Actual cash receivable = 22500

But since cash Discount is recieved.. actual cash will be 21375

The Three golden rules of accounting are

Personal account - Debit the receiver credit the giver

Nominal account - Debit All expenses and losses credit All incomes and gains

Real Account - Debit what comes in ,credit what goes out

segregating accounts: -

Real accounts..all assets and Liabilities come under it

Nominal accounts...all incomes gains losses expenses come under it

Personal account..as the Name suggests..

Cash is Going out..it should be credited.

cash Discount recieved is a gain..it should be credited..

purchases is an expense it should be debited..

Dinesh is the giver..he should be credited..

So the Journal Entry will be.....

Purchases a/c Dr 45000

To Cash a/c 21375

To Discount recieved a/c 1125

To Dinesh a/c 22500

(Being Goods Purchased from Dinesh)