Question

Purchased at 10% trade discount goods from rana,their first price being rs2000

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 , where its expenses to the company therefore its debited

Rana A/c - Personal A/c , where Rana is giver of goods therefore its credited

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Calculation of trade discount and net purchases

Trade discount

=2000 * 10%

=200

Net  purchases = sales - trade discount

                            = 2000 - 200

                            =1800

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Journal entry

Purchases A/c   Dr    1800

     To rana A/c                         1800

(being purchased goods on credit )

Answer 2

List Price / First Price : Rs.2000

Trade Discount = 10%(Rs.2000) = Rs.200

Agreed Price/ Invoice Price = Rs.2000 - Rs.200 = Rs.1800

Journal Entry:

Purchases A/C   Dr   Rs.1800

          To Rana    Rs.1800

(Being Goods purchased from Rana)

Explanation:

We purchased goods at Trade Discount of 10%. Trade Discount should not be shown in the books of accounts . Only,cash discount should be shown. Hence, Trade Discount is not credit.

Purchases should be credited at Invoice Price only, which is (List Price - Trade Discount)