Question

Journalise following transactions :
(xii) Mittal Bros. purchased 100 shawls @ 3,000 per shawl. Allowed 10% Trade Discount
and 3% Cash Discount if payment is made within 14 days. Mittal Bros. received
10 shawls of poor quality, which it returned. Mittal Bros. settled the payment in 10 days.
(xiii) Sold to Gupta Shawls, 100 shawls @ 200 per shawl on 4th January, 2021. Trade
Discount 25% and Cash Discount 5% if full payment is made within 14 days. Gupta
Shawls sent 50% of the payment on 14th January, 2021 and balance payment on
10th February, 2021.
[Hint: Gupta Shawls will not get cash discount as full payment is not made by it within
14 days

Answer 1

Journal-1

(I)

Calculating trade discount :-

10% of ₹3,00,000 = ₹30,000

Selling price = Cost - discount

Selling price = ₹3,00,000 - ₹30,000 = ₹2,27,000

Journal entry :-

Mittal Bros. . . . Dr ₹2,70,000

• • • To sales A/c ₹2,70,000

( Being goods sold to Mittal Bros. )

(II)

Journal entry :-

Sales return A/c . . . Dr ₹27,000

• • • To Mittal Bros. ₹27,000

( Being goods returned by Mittal Bros.)

Note : Goods are returned after subtracting the trade discount of 10% which was allowed on sale. 10% of ₹30,000 = ₹3,000 and ₹30,000-₹3,000 = ₹27,000

(III)

Now Mittal Bros. is liable to pay 2,43,000. Since the payment is made within 15 days, we have to allow cash discount of 3%.

3% of ₹2,43,000 = ₹7,290

Cash payable by Mittal Bros. ₹2,43,000 - ₹7,290 = ₹2,35,710

Journal entry :-

Cash A/c . . . Dr ₹2,35,710

Discount allowed A/c . . . Dr ₹7,290

• • • To Mittal Bros. 2,43,000

( Being cash received from Mittal Bros and allowed discount )

Journal-2

2021, Jan.4

Trade discount allowed to Gupta shawls = 25% of ₹20,000 = ₹5,000

Cash payable by Gupta shawls = ₹20,000- ₹5,000.= ₹15,000

Journal entry :-

Gupta shawls . . . Dr 5,000

• • • To sales A/c 15,000

( Being goods sold to Gupta shawls)

2021, Jan.14

Half of the cash received from Gupta shawal i.e. 1/2 of ₹15,000 = ₹7,500

Journal entry :-

Cash A/c . . . Dr ₹7,500

• • • To Gupta shawal ₹7,500

( Being cash received from Gupta shawal)

2021, Feb.10

Gupta shawal paid the balance amount after more than 14 days. i.e. he is not capable of cash discount. We was liable to pay only ₹7,500 which is now paid.

Journal entry :-

Cash A/c . . . Dr ₹7,500

• • • To Gupta shawal ₹7,500

( Being cash received from Gupta shawal)

Remember that . . .

• Trade discount is not mentioned in the books of accounts, we only mention cash discount.

[ • • • Is used for indentation or spaces ]