Question

raghav goods purchase from sohan rs 20000 and cash discount 5%

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 - real A/c , goods comes to the business , therefore its debited

Discount received a/c - its the income to the company, therefore its credited

Sohan A/c -personal A/c,hes the giver of the goods , hes the creditor to us , therefore its credited

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Journal entry

Purchases A/c  Dr              20000

           To discount received A/c       1000    

           To sohan A/c                              19000

(being purchased goods from sohan on credit )

*note cash discount  = 20000*5%

                                 =1000

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