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.
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Answer Posted / imran malik
Trade discount is not shown in accounting books but still it
is calculated and subtracted from the principle amount and
the remaining amount (result) becomes the principle amt at
which cash discount would be calculated and shown in the
accounting books:
Sol:
Given: Goods sold @100000
Therefore, TD= 100000*(5/100)=5000
Selling price= Principle amt - TD
= 100000 - 5000
= 95000
Now, CD would be applied on the above answer, i.e on 95000
Therefore CD = 95000 * (5/100)
= 4750
Cash Received = 95000 - 4750
= 90250
Journal Entries:
Purchase Goods A/C Dr 95000
---- To Cash A/C 90250
---- To Discount Received 4750
Hope the answer is right
| Is This Answer Correct ? | 41 Yes | 9 No |
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