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

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

Answer»

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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