Bought goods for cash of the list price of rs 80000 at 10% t.d and 2.5% c.d
Answers
Purchases A/C. Dr. Rs. 72,000
To Cash Discount A/C. Rs.1,800
To Cash A/C. Rs.70,200
(Being goods purchased for cash)
3 golden rules
• debit the receiver , credit the giver
• debit what comes in , credit what goes out
• debit all the expenses and losses , credit all the incomes and gains
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reason for debit and credit
Purchases A/c - nominal A/c , where is the expenses to the company therefore its debited
Cash A/c - Real A/c , here money goes out of the company , therefore its credited
Discount received A/c - Nominal a/c , where its gain to us because we are paying less than whats payable , therefore its credited
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Calculation of trade discount and cash discount
Trade discount = sales * 10%
= 80000*10%
=8000
Net bill amount = sales - trade discount
= 80000-8000
=72000
* Trade discount will be deducted from sales amount . no journal entry passed for trade discount
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cash discount = 72000* 2.5%
= 1800
net bill amount payable = 72000- 1800
=70200
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Journal entry
Purchases A/c Dr 72000
To discount Received A/c 1800
To cash A/c 70200
(being goods purchased )