Purchase goods worth 16000 less 20%trade discount and 5% cash discount from malhotra &co.for cash and supplied them to Ramesh &co.at list price less 10%trade discount
Answers
Answer:
1) Purchases Ac Dr. 12,160
Discount Ac Dr. 640
To Cash Ac 12,800
2) Ramesh & Co. Ac Dr. 14,400
To Sales Ac 14,400
Explanation:
1) Trade Discount (TD) is never recorded in the Books of Accounts.
2) However Cash Discount (CD) is always recorded in the Books of Accounts.
3) Ex Trade Discount Price:
=16,000 - 16,000x20/100
=16,000 - 3,200 (TD)
=12,800
4) Ex Cash Discount Price:
=12,800 - 12,800x5/100
=12,800 - 640 (CD)
=12,160
5) In the absence of information, the original price is considered to be the list price i.e. 16,000
6) Ex Trade Discount Price for 2nd transaction:
=16,000 - 16,000x10/100
=16,000 - 1,600
=14,400
1) Purchases Ac Dr. 12,160
Discount Ac Dr. 640
To Cash Ac 12,800
2) Ramesh & Co. Ac Dr. 14,400
To Sales Ac 14,400
1) Trade Discount (TD) is never recorded in the Books of Accounts.
2) However Cash Discount (CD) is always recorded in the Books of Accounts.
3) Ex Trade Discount Price:
=16,000 - 16,000x20/100
=16,000 - 3,200 (TD)
=12,800
4) Ex Cash Discount Price:
=12,800 - 12,800x5/100
=12,800 - 640 (CD)
=12,160
5) In the absence of information, the original price is considered to be the list price i.e. 16,000
6) Ex Trade Discount Price for 2nd transaction:
=16,000 - 16,000x10/100
=16,000 - 1,600
=14,400