Question

April 2 : Purchased goods of rupees 200000 less trade discount 10% from Prabhat electric co on the terms that on payment received within 10 days cash discount will be allowed at the rate 5% and on payment received with the next 20 days 2% cash discount will be allowed

Answer 1

Answer:

Explanation:

1. Purchase A/c Dr  1,80,000.00

     To M/s Prabhat Electric Co.     1,80,000.00

(being Purchased goods of rupees 200000 less trade discount 10% from Prabhat electric co on the terms that on payment received within 10 days cash discount will be allowed at the rate 5% and on payment received with the next 20 days 2% cash discount will be allowed)

IF PAYMENT MADE WITHIN 10 DAYS

2. M/s Prabhat Electric Co.     1,80,000.00

       To Bank A/c                                1,71,000.00

       To Discount A/c                              9,000.00

(Being payment made to M/S Prabhat Electric Co & discount allowed by them 5 %)

IF PAYMENT MADE AFTER 10 DAYS BUT WITHIN 30 DAYS

M/s Prabhat Electric Co.     1,80,000.00

       To Bank A/c                                1,76,400.00

       To Discount A/c                              3,600.00

(Being payment made to M/S Prabhat Electric Co & discount allowed by them 5 %)

NOTE:

In a business, it is advisable to avail maximum discount so as to maximise profit, provided there is no financial constraints.