Question

goods sold to kapil 70,000 @ 2% cash discount in 1/2 down payments & Journal Entry ?​

Answer 1

what are Journal Entry of Cash and Trade Discount some time cash and trade discount are allowed to a customer in one transaction only under such transaction we have to understand the basic concept of trade and cash discount before recording the journal entry?

Example 1: Avinash traders sold goods to Manish trader Rs 20,000 and trade discount Rs 10%.

here to calculate Trade discount =

20,000 X 10/100 = 2000

Now deduct trade discount from total sale amount = 20,000 – 2000 = 18000

Journal entry for the same will be in the book of Avinash traders is

Manish Dr 18000

To Sale A/c 18000

(being goods sold to Manish and TD have given)

Note: Trade discount is not shown in the books of accounts.

Journal entry for the same will be in the book of Manish traders is

Purchase A/c Dr. 18000

To Avinash 18.000

(being goods purchased form Avinash and TD received 10%)

Example 2:

Purchase goods form Akash on 1/4/16 Rs 10000 and he gives us Cash discount @ 5% if payment is made within 3 days

paid Cash to Akash on 2/4/16.

Purchase A/c Dr. 10000

To Akash 10000

(being goods purchased form Akash)

Akash 10,000

To Cash A/c dr 9500

To Discount Received A/c Dr 500

(being cash paid to Akash and received cash

Example 3

Ram purchased goods on Credit from Rahim Rs 20000 with trade discount allowed by Rahim is 10%. Rahim made 60% of the payment immediately and received 2% cash discount.

solution :

In the given transaction, first of all, we have to understand the meaning of a transaction in which ram sale goods to Rahim after 20% trade discount which will be calculated like

20000 x 10% which will be Rs. 2000.

now goods are sold for rupees 18000 only because the trade discount is first of all deducted in the transaction

Now out of this Rs 18000 received 60% of payment immediately which is calculated like this :

18000x 60% = 10800, therefore, cash discount need to be calculated on this 10800 which is

10,800 x 2% = 216

now out of 18000

cash payment after cash discount is 10800-216 = 10584

and credit purchased from Rahim is 10800 – 216-10584=7200

Here one thing keep in mind that cash discount is allowed on cash payment or receipt only and in the above case cash payment is only 60% and discount on it is 2% which comes to 10800 – 216 = 10584

Answer 2

Kapil A/c ....Dr 35,000
Cash A/c ....Dr 35,000
To Discount A/c 1,400
To Sales A/c 68,600





Working Notes:-

Disc:- 70,000×2/100=1400

70,000-1400=68600
Sales Amount=68600

1/2down paymen=68600×1/2=34300