Goods purchased at 10% trade & 1% cash discount for 10000
Answers
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%
= 10000*10%
=1000
Net bill amount = sales - trade discount
= 10000-1000
=9000
* Trade discount will be deducted from sales amount . no journal entry passed for trade discount
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cash discount = 9000* 1%
= 90
net bill amount payable = 9000-90
=8910
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Journal entry
Purchases A/c Dr 9000
To discount Received A/c 90
To cash A/c 8910
(being goods purchased )
Purchases A/C. Dr. Rs.9000
To Discount received A/C. Rs.90
To cash A/C. Rs.8910
(Being goods purchased )