Purchased goods from Amar Rs. 3,00,000 at a trade discount of 10% and cash discount of 2%. Only 70% amount paid by cheque.
Answers
Answer:
For example
Explanation:
If you purchased good for 90,000 (your local currency) with trade discount of 10%.
10% of 90,000 = 9,000
You were liable to pay 81,000 i.e. 90,000 less 9,000.
If you paid third of the amount due by cheque, this equal to 81,000/3 = 27,000
This left 54,000 payable by cash. You got 10% cash discount.
10% of 54,000 = 5,400.
Actual cash you paid was 54,000 less 5,400 = 48,600.
Having got the figure for each part, the following journal entries will be passed
Debit Purchases Account with 90,000
Credit Cash Account with 48,600
Credit Bank Account with 27,000
Credit Discount Received Account with 9,000
Credit Discount Received Account with 5,400
I hope this is clear enough.
Calculation of trade discount :-
Price = Rs. 3,00,000
Trade discount = 10% of 3,00,000 = Rs. 30,000
New price = Rs. 3,00,000 - Rs. 30,000
New price = Rs. 2,70,000
Calculation of cash discount :-
Since only 70% of the amount is paid by cheque, cash discount is only applicable on 70% amount. Cash discount is only calculated at the amount which is paid immediately when the transaction takes place.
70% of Rs. 2,70,000 = Rs. 1,89,000
Cash discount = 2% of Rs. 1,89,000 = Rs. 3,780
Amount paid and amount liable :-
Cash paid by cheque = 1,89,000 - 3,780
Cash paid by cheque = 1,85,220
We are liable to pay, = 2,70,000 - 1,89,000
We are liable to pay, = 81,000
Journal entry :-
Purchase A/c . . . Dr - 2,70,000
- To bank A/c - 1,85,220
- To discount Received A/c - 3,780
- To Amar - 81,000
( Being goods purchased and only 70% amount paid by cheque and discount received )