Question { TCS, 52543 }

what is the difference between cash discount and trade
discount.

what is the journal entry for purchase of 100000 giving
(a) 5% trade discount
(b) 5% cash discount.

Answer

Trade Discount is the discount provided on bulk purchases
and generally trade discount is not shown in the books of
accounts the entry for purchase of 10,000 5% trade
discount is
Purchase A/c....Dr 9500
To Sundry Debtor/cash/bank A/c. 9500

Cash Discount is the discount provided for payments made
before due date and for cash purchases and this is gain to
the company and is shown in the books of accounts and the
entry will be
Purchase A/c....Dr 10000
To Discount Received A/c 500
To cash A/c 9500