param sells good of RS. 10000 allowing 10% trade discount and 2% cash discount. pass the journal entry.
Answers
Disclaimer:
The attached image is the screenshot of the excel file I create my self to prepare the journal; it is not a screenshot from any other website or image of a book.
Answer:
Refer to the attachment for the journal entry.
Rules of Accounting:
Increase in assets or expenses/losses is debited and decrease in assets and expenses/losses is credited.
Increase in liabilities, income/gains and capital is credited and decrease in them is debited.
Explanation:
First, trade discount is subtracted from the sale value.
After that, cash discount is subtracted from the balance remaining after subtracting trade discount from sale value.
Also, trade discount is not recorded in journal entry because in a journal book, transactions of only financial nature are recorded and allowing or receiving trad discount is not a transaction of financial nature.
Working Note:
Sale Value: Rs. 10,000
Less: Trade Discount: Rs. 1,000 (because 10% of 10,000 is 1,000)
Balance = Rs. 9,000
Less: Cash Discount: Rs. 180 (because 2% of 9,000 is 180)
Balance: Rs. 8,820
