Question

Goods costing Rs.40,000 are sold at a profit of @ 25% on cost and Trade Discount allowed @10% and Cash Discount of 5% is also allowed. Half the payment was received immediately at the time of sale. What is the amount of Cash received at the time of sale?

Answer 1

Answer:

Rs.21,375

Explanation:

S.P of goods sold= 25/100x 40000+Rs.40000

=Rs. 50000

Less: (5000)(Trade discount)

(2250)(Cash Discount)

= Rs. 42750

Amount received= Rs. 42750/2=Rs. 21375

NOTE: Cash discount is calculated on the net value(after deducting Trade discount)

Answer 2

Concept:

Trade Discount-

• The supplier's deduction from the catalogue price of the goods is referred to as a trade discount.
• It is permitted due to commercial considerations such as trade practises, bulk orders, and so on.
• Both cash and credit transactions are permitted.
• It is not recorded in the accounting books.

Cash Discount-

• Cash discount refers to the allowance given to customers by the supplier on the invoice price in exchange for immediate payment.
• It is permitted as an incentive or motivation for payment within a certain time frame.
• It is only permitted on cash payments.
• It is recorded as an expense on the Income Statement.

Given:

• CP = 40000
• Profit = 25%
• TD = 10%
• CD= 5%

Find:

Amount of cash received at the time of sale?

Solution:

Cost price                                      40000

Add: Profit @ 25%                         10000

Selling Price                                   50000

Less:Trade Discount @ 10%          (5000)

List Price                                          45000

Since, half the amount is immediately paid, then the amount paid is (45000/2) - 5% = 21375.

Hence, Rs.21375 was paid immediately at the time of sale while the rest 45000 will be paid later.

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