Question

sales of goods at counter after allowing trade discount of 10% , Treatment

Answer 1

the method of payment is not mentioned in the question..so im explaning the both scenarios cash and credit ..1) credit ,2) cash

1)First transaction a two accounts... Sales account (Goods are sold) ... Debtor account (Goods are sold on credit)


2)Second Transaction Affects two accounts.. . Sales account (Goods are sold) ...cash account (cartage paid by cash)..

Trade Discount is not recorded in the books of accounts unlike cash Discount..it is deducted from the List price of that product and the Net price is considered to be the historical price of that product.....

Let List Price= 24000

Trade Discount rate = 20%

Trade Discount amount= List price × Trade Discount rate..

=24000 × 20 % = 4800

Actual Sale Price = List Price - Trade Discount amount

=24000 - 4800 = 19200


The Three golden rules of accounting are

Personal account - Debit the receiver credit the giver

Nominal account - Debit All expenses and losses, credit All incomes and gains

Real account - Debit what comes in, credit what goes out


Debtor account is a Personal account..(Debtor)

Cash account is a real account ..(all assets and Liabilities come under Real account.. cash is a real account)

Sales account is a nominal account...(all expenses incomes gains losses come under nominal account.. Sales is an income)

in contention with the above rules...The Journal entries will be...

1)Debtor a/c Dr 19200

To Sales a/c 19200

(Being Goods Sold on credit)

2)Sales a/c Dr 19200

To cash a/c 19200

(Being Goods Sold for cash )