Question

Bought goods from Manohar Traders for Rs.140,000
on 5 % Trade Discount and paid Rs. 13,000 in cash:
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Answer 1

Answer:

Firstly, note that all types of discounts on purchases (e.g trade discount, cash discounts, rebates, etc) are treated as indirect revenue (debit for decrease & credit for increase).

Trade Discount: 20% of 10,000 = Rs. 2,000

First scenario: Cash/Cheque Purchase.

In this case, the journal entry will be as follows:

Dr. Purchases Account(purchase of goods alc) Rs. 10,0000

Cr Trade Discount Account Rs. 2,000

Cr Cash/Bank Account Rs. 8,000

Second scenario: Credit Purchase.

In this case, the journal entry will be as follows:

Dr. Purchases Account(purchase of goods alc) Rs. 10,0000

Cr Trade Discount Account Rs. 2,000

Cr Accounts Payables (Govind) Rs. 8,000

Hope this reply helps