Question

purchase 100 kgs from tarun at rs 70 kg at 5% cash discount half the amount was paid by chaqe

Answer 1

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 , its expense to the company , therefore its debited

Discount received A/c - Nominal A/c , its a gain to us as we paying less than its payable, therefore its credited

Bank A/c - personal A/c - Where banke is payer to the supplier therefore its credited

Tarun A/c - personal A/c, hes the creditor , we are liable to pay him therefore its credited

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Calculation

purchases price = 100 Kg * 70rs

                            = 7000

Cash discount = 3500 - (3500* 5%)

                          =3500 - 175

                           =3325

Balance payable =  7000 - 3500

                              = 3500

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Journal entry

Purchases A/c  Dr  7000

     To Cash A/c                             3325

     To Discount received A/c         175

     To tarun A/c                               3500

(Being Purchased goods from tarun)

Answer 2

Total amount to be paid = 100kgs × Rs.70 = Rs.7000

Half the amount = Rs.3500

Cash discount = 5%(Rs.3500) = Rs.175

Journal Entry

Purchases A/C. Dr. Rs.7000

To Cash Discount A/C. Rs.175

To Cash A/C. Rs 3325

To Tarun A/C. Rs 3500

(Being goods purchased from Tarun)