Please answer both questions and tell different b/w trade discount and cash discount - Accountancy - Recording of Transactions - II

Question

Please answer both questions and tell different b/w trade discount
and cash discount

Komal Rani · Accepted Answer

Dear Student

JOURNAL

Sr
No
Particulars
L
F
Debit
Credit

a

Cash A/c
(8820*20%)

Dr

1764

Discount Allowed A/c
(9000*2%)

Dr

180

Mohan A/c
(8820*80%)

Dr

7056

To Sales A/c
(10000-10000*10%)

9000

(Being goods sold to Mohit @10%
trade discount)

b

Purchases A/c
(15000-15000*10%)

Dr

13500

To Dinesh
A/c

13500

(Being goods purchased @ 10% trade
discount)

BASIS OF DIFFERENCE
TRADE DISCOUNT
CASH DISCOUNT

MEANING
It is defined as a discount given by the
seller to the buyer as a deduction in the list price of the
product
It refers to deduction in the amount of
sales allowed by seller to pu rchaser for immediate payment

PURPOSE
To encourage bulk sales
to facilitate prompt payment

DISCLOSURE
It is not recorded in books of
accounts
It is shown in books of accounts

TIME OF DISCOUNT
At the time of sale
At the time of payment

REGARDS

BASIS OF DIFFERENCE	TRADE DISCOUNT	CASH DISCOUNT
MEANING	It is defined as a discount given by the seller to the buyer as a deduction in the list price of the product.	It refers to deduction in the amount of sales allowed by seller to pu.rchaser for immediate payment
PURPOSE	To encourage bulk sales	to facilitate prompt payment
DISCLOSURE	It is not recorded in books of accounts	It is shown in books of accounts
TIME OF DISCOUNT	At the time of sale	At the time of payment

Sr. No.	Particulars		Debit	Credit
a	Cash A/c (8820*20%)	Dr.	1764
	Discount Allowed A/c (9000*2%)	Dr.	180
	Mohan A/c (8820*80%)	Dr.	7056
	To Sales A/c (10000-10000*10%)			9000
	(Being goods sold to Mohit @10% trade discount)
b	Purchases A/c (15000-15000*10%)	Dr.	13500
	To Dinesh A/c			13500
	(Being goods purchased @ 10% trade discount)