Question

What will be jourmal entry for sold goods costing ₹50000 to Aarav for cash at profit of 20% on cost less 20% trade discount

Answer 1

Given" sold goods costing 20000 to sunil at a profit of 20% on sale less 20% trade discont and paid cartage 150"

There are two Transactions in the question...

First transaction a two accounts... Sales account (Goods are sold) ... Sunil account (Goods are sold to Sunil on credit)

Second Transaction Affects two accounts.. Cartage (carriage outwards) account ...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.....

Given Cost Price = 20000

Profit rate = 20%

Profit= Cost Price × Profit rate

= 20000 × 20 % = 4000

List Price= Cost Price + Profit

= 20000 + 4000 =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

Sunil 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)

cartage account is a nominal account...(all expenses incomes gains losses come under nominal account.. cartage is an expense)

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

Sunil a/c Dr 19200

To Sales a/c 19200

(Being Goods Sold to Sunil)

Cartage a/c Dr 150

To cash a/c