Question

sold goods costing rs. 1,00,000to aditya for a20%profit., less trade discount of 10% and charge 5%of IGST and paid cartage of rs. 2000

Answer 1

Given "sold goods costing rs. 1,00,000to aditya for a20%profit., less trade discount of 10% and charge 5%of IGST and paid cartage of rs. 2000"

Cost Price of Goods = 100000

Rate of profit= 20% = 100000×20%=20000

Selling Price= Cost Price + Profit = 100000+20000
=120000(List Price)

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

Trade Discount rate = 10%

Trade Discount= selling price ×10% = 120000×10%=12000

Net Selling price= selling price (list price) - Trade Discount
= 120000 - 12000 = 108000

IGST rate = 5%

IGST amount= 108000 × 5% = 5400

Cartage (carriage outwards) = 2000

The current transaction affects 4 accounts...
Sales a/c(Goods are being sold) , Output IGST a/c( Gst on sales paid)..aditya a/c or cash a/c (the question is not clear.. whether payment is made on cash or on credit) , cartage a/c(transportation charges paid)..

Where Sales a/c , cartage a/c , Output IGST a/c are nominal accounts(all the expenses losses Gains income come under it)... Aditya a/c is Personal account...Cash a/c is a real account(all the assets and Liabilities come under it)

The Three golden rules of accounting are

Personal Account - Debit the receiver,credit the giver

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

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

In contention with the above rules..sales being an income and output Igst being a gain..they should be credited..Cash is coming in /Aditya is the receiver.. Carriage is an expense..so they should be debited to that extent..

So the Journal Entry will be:-


Aditya a/c / Cash a/c. Dr. 111400

Carriage a/c. Dr 2000

To output Igst a/c. 5400

To sales a/c 108000

(Being Goods Sold to Aditya for cash/credit)