Bought goods from Manohar Traders for Rs.140,000 on 5 % Trade Discou

1.	Bought goods from Manohar Traders for Rs.140,000 on 5 % Trade Discount and paid Rs. 13,000 in cash:
Answer» ong>Answer: Firstly, NOTE that all types of discounts on purchases (e.g trade discount, cash discounts, REBATES, etc) are treated as indirect REVENUE (DEBIT for decrease & credit for increase). Trade Discount: 20% of 10,000 = Rs. 2,000 First scenario: Cash/Cheque Purchase. In this case, the journal entry will be as follows: Dr. Purchases Account(purchase of goods alc) Rs. 10,0000 Cr Trade Discount Account Rs. 2,000 Cr Cash/Bank Account Rs. 8,000 Second scenario: Credit Purchase. In this case, the journal entry will be as follows: Dr. Purchases Account(purchase of goods alc) Rs. 10,0000 Cr Trade Discount Account Rs. 2,000 Cr Accounts Payables (Govind) Rs. 8,000 Hope this reply helps

Bought goods from Manohar Traders for Rs.140,000 on 5 % Trade Discount and paid Rs. 13,000 in cash:

Answer»

ong>Answer:

Firstly, NOTE that all types of discounts on purchases (e.g trade discount, cash discounts, REBATES, etc) are treated as indirect REVENUE (DEBIT for decrease & credit for increase).

Trade Discount: 20% of 10,000 = Rs. 2,000

First scenario: Cash/Cheque Purchase.

In this case, the journal entry will be as follows:

Dr. Purchases Account(purchase of goods alc) Rs. 10,0000

Cr Trade Discount Account Rs. 2,000

Cr Cash/Bank Account Rs. 8,000

Second scenario: Credit Purchase.

In this case, the journal entry will be as follows:

Dr. Purchases Account(purchase of goods alc) Rs. 10,0000

Cr Trade Discount Account Rs. 2,000

Cr Accounts Payables (Govind) Rs. 8,000

Hope this reply helps

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