Question

Sold goods to parul of list price of 40000at 10% discount against cheque payment

Answer 1

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

By reading the question it seems to be 'cash Discount '

Given"Sold Goods to parul of list price of 40000 at 10% discount against Cheque payment

This transaction affects 3 accounts... sales a/c (we are selling Goods) , Bank a/c(We are recieving money through Cheque) , Discount allowed a/c (we are-allowing discount)

Where Sales and Discount allowed are nominal accounts ( all the income expenses losses Gains come under it). Bank is Real Account(all the assets and liabilities come under it)..Creditor is a personal a/c..

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..

As per the above rules , Discount allowed is a loss,it should be debited whereas cash is coming into the bank.. Sales is an income,so should be credited to that extent....

The Journal Entry will be

Bank a/c Dr 36000

Discount allowed a/c Dr 4000

To sales a/c 40000

(Being goods sold)