Purchased good from shyam rupees 10000 @10%trade discount and 5% cash discount and paid 50% by cheque
Answers
Purchases A/C. Rs.9,000 To Discount Received A/C. Rs.450 To Shyam A/C. Rs.4275 To Bank A/C. Rs.4275 (Being goods purchased from Shyam)
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 is the expenses to the company therefore its debited
Bank A/c - personal A/c , where banker pays to the supplier , here baker is payer therefore its credited
Discount received A/c - Nominal a/c , where its gain to us because we are paying less than whats payable , therefore its credited
Shyam A/c - personal A/c , where shyam is the creditor we need to pay him , therefore shyam is credited
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Calculation of trade discount and cash discount
Trade discount = sales * 10%
= 10000*10%
=1000
Net bill amount = sales - trade discount
= 10000 - 1000
=9000
* Trade discount will be deducted from sales amount . no journal entry passed for trade discount
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cash discount = 9000 *50% * 5%
= 225
cash payment = 4500 - 225
= 4275
net bill amount payable = 4500
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Journal entry
Purchases A/c Dr 9000
To discount Received A/c 225
To cash A/c 4275
To shyam A/c 4500
(being goods purchased )