Question

Sold goods to pawan of list price 20000 at 10 percent trade discount

Answer 1

Trade discount is not considered or recorded separately in the books of accounts..Trade discount is deducted from the list price and net price is considered to be the historical price of that product..

Given List price = 20000

Trade Discount= 10%

Historical price = 20000 - 10% = 18000

only 18000 is recorded in the books of accounts unlike cash discount...

The current transaction affects two accounts... Pawan a/c (Personal account/ Debtor) , Sales a/c(Nominal account/ income)

As Per golden rules of accounting -

Personal account Debit the receiver credit the giver

Nominal account Debit All expenses and losses credit all incomes and Gains


So the Journal Entry will be

Pawan a/c. Dr. 18000

To Sales a/c. 18000

(Being sales made to pawan)