Question

Sold goods to Raghavan less 5%for cash in 10 days

Answer 1

Trade discount: It simply means a discount which is given to all and this discount should not be recorded in the books

Sales amount=50000

(Less) Trade discount@10%=5000.

Amount after trade discount =45000

Cash Discount @10%=4500

Amount after cash discount =40500

The Journal entry of the above transaction is:

Cash A/c Dr 8100

Bank A/c Dr 20250

Discount allowed A/c Dr 4500

Debtors A/c Dr 12150

To Sales A/c. 45000

(Being sale made with trade discount 5000 and cash discount 4500)

Amount received through cheque @50%

40500×50% = 20250

Amount received in cash @ 20%

40500×20%=8100

Amount due to debtors @30%

40500×30% 12150