Question

Bought goods from krishana of list price 25000 less trade discount 20%

Answer 1

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

Krishana A/c - personal A/c, goods are given by krishana , where hes the giver , therefor its credited

purchases A/c - Nominal A/c , its the expenses to the company therefore its debited

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calculation of purchase cost

purchases = 25000

trade discount = 25000*20%

=5000

net purchases = 25000-5000

=20000

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Journal entry

Purchases A/c Dr 20000

To Krishana A/c 20000

(being credit purchases made)

note : trade discount should be deducted from purchases amount .

no journal entry passed for trade discount