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Answer Posted / manohar reddy patlolla
Trade discount is a discount that you receive from the
seller at the time of buying goods. (May be because of
buying higher quantity or due to your business relations
with the seller etc...) and the same is deducted or adjusted
in the invoice and you will be paying the net amount only.
Hence it does not go to your accounting books. You will be
Debiting Inventory and Crediting Accounts Payable for the
net amount of invoice you paid.
Whereas, Cash discount is a type of discount that is given
to the debtor (buyer) for making prompt payment.
For example, the Accounts Payable in your books shows a
credit balance of $1,000 that is due after one month. If you
make the payment before the due date, you may be granted a
special discount. Assume you got a discount of $ 100 for
making early payment. The entry will be as follows:
Debit : Accounts Payable $ 1,000
Credit : Bank Account $ 900
Credit : Discount Received $100
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A firm had the following Balances on 1 January 1994: (i) Provision for bad and doubtful debts Rs 2,500 (ii) Provision for discounts on debtors Rs 1,200 (iii) Provision for discounts on creditors Rs 1,000 During the year, bad debts amounted to Rs 2,000, discounts allowed were Rs 100 and discounts received were Rs 200. During 1995 bad debts amounting to Rs l,000 were written off while discounts allowed and received were Rs 2,000 and Rs 5,000 respectively. Total debtors on 31 December, 1995 were Rs 48,000 before writing off bad debts, but after allowing discounts. On 31 December, 1995, this amount was Rs 19,000 after writing off the bad debts, but before allowing discounts. Total creditors on these two dates were Rs 20,000 and Rs 25,000 respectively. It is the firm’s policy to maintain a provision of 5% against bad and doubtful debts and 2% for discount on debtors and a provisions of 3% for discount on creditors. Show the accounts relating to provisions on debtors and provisions on creditors for the year 1994 and 1995.
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Wipro Limited
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Wipro Limited What is a comprehensive income? What is fair value accounting? What is partnership accounting? what is the head for stock trnasfer what is use of cost category ? which type is useful in
accounting work ? give answer with solid example because iam
slow learner in accounting line.
