Question

Pass Journal entry - On 18 jan goods sold to Shipra at list price of Rs.50000, less 20% trade discount and 4% casg discount if payment is made within 7 days. 75% payment is received by cheque on jan 23.

Answer 1

Bank a/c. 28800
discount a/c. 1200
shipra. 10000
To sales a/c. 40000
note:it is on when cash is received

Answer 2

The transaction affects four accounts accounts... Sales account (Goods are sold) ... bank account (Goods are sold to shipra and received cheque),shipra account (part of goods Sold on credit) , Discount Allowed account (cash discount)

Trade Discount is not recorded in the books of accounts unlike cash Discount..it is deducted from the List price of that product and the Net price is considered to be the historical price of that product.....

List Price= 50000

Trade Discount rate = 20%

Trade Discount amount= List price × Trade Discount rate..

=50000 × 20 % = 10000

Actual Sale Price = List Price - Trade Discount amount

=50000 - 10000 = 40000

since the payment is made with in 7 days.. cash discount is to be provided..

75% is recieved..

40000 ×75% = 30000

discount allowed= 30000 × 4% = 1200

so Cheque recieved will be 30000 - 1200 = 28800

remaining 10000 on credit

The Three golden rules of accounting are

Personal account - Debit the receiver credit the giver

Nominal account - Debit All expenses and losses, credit All incomes and gains

Real account - Debit what comes in, credit what goes out

Bank account is a real account ..(all assets and Liabilities come under Real account.. cash is a real account)
shipra is the giver and its a personal account

discount allowed is a nominal account..

in contention with the above rules...The Journal entries will be...

bank a/c Dr 28800

discount allowed a/c Dr 1200

shipra a/c Dr 10000

To Sales a/c 40000

(Being Goods Sold to Shipra)