When goods are sold on credit, amount will be received after some days.
Trade discount is allowed at the time of credit sales.
At the time of cash received, cash discount is allowed.
Trade discount is not recorded in journal entry but cash discount is recorded.
Discount allowed is debited but discount received is credited.
Full Settlement and Discount Allowed
(Cash received and discount allowed)
Cash account |
Dr |
Cash received |
Increase in assets |
Bank account |
Dr |
Cheque received |
Increase in assets |
Discount allowed |
Dr |
Discount allowed |
Increase in expenses |
To Mr A’s account |
|
Name of debtors |
Decrease in assets |
To XYX Traders account |
|
Name of firm |
Decrease in assets |
To Debtor (customer) account |
|
Name not given |
Decrease in assets |
(Being- amount received and discount allowed) |
|
|
|
|
|
|
|
Journal Entry
In the book of …………
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Cash account |
Dr |
|
xxxxx |
|
|
Bank account |
Dr |
|
xxxxx |
|
|
Discount allowed account |
Dr |
|
xxxxx |
|
|
To Mr A’s account |
|
|
|
xxxxx |
|
To XYZ Traders account |
|
|
|
xxxxx |
|
To Debtors (customer) account |
|
|
|
xxxxx |
|
(Being- amount received and discount allowed) |
|
|
|
|
|
|
|
|
|
|
Full Settlement and Discount Received
(Cash paid and discount received)
Mr A’s account |
Dr |
Name of creditors |
Personal account |
XYZ Traders account |
Dr |
Name of firm |
Personal account |
Creditors (suppliers) account |
Dr |
Name is not given |
Personal account |
To Cash account |
|
Cash paid |
Real account |
To Bank account |
|
Cheque given |
Real account |
To Discount received account |
|
Discount received |
Nominal account |
(Being- amount paid and discount received) |
|
|
|
|
|
|
|
Journal Entry
In the book of …………
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Mr A’s account |
Dr |
|
xxxxx |
|
|
XYZ Traders account |
Dr |
|
xxxxx |
|
|
Creditors (suppliers) account |
Dr |
|
xxxxx |
|
|
To Cash account |
|
|
|
xxxxx |
|
To Bank account |
|
|
|
xxxxx |
|
To Discount received account |
|
|
|
xxxxx |
|
(Being- amount paid and discount received) |
|
|
|
|
|
|
|
|
|
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
PROBLEM: 6A
GB Traders has following extracted data:
Cash received from Mr Robin Sharma Rs 19,000 and discount allowed Rs 1,000.
Required: Journal entry
[Answer: Discount allowed = 1,000]
SOLUTION:
Journal Entry
In the book of GB Traders
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Cash account |
Dr |
|
19,000 |
|
|
Discount allowed |
Dr |
|
1,000 |
|
|
To Robin Sharma’s account |
|
|
|
20,000 |
|
(Being- cash received and discount allowed) |
|
|
|
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
PROBLEM: 6B
GB Traders has following extracted data:
Cheque received from DK Suppliers Rs 85,500 in full settlement of Rs 86,000.
Required: Journal entry
[Answer: Discount allowed = 500]
SOLUTION:
Journal Entry
In the book of GB Traders
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Bank account |
Dr |
|
85,500 |
|
|
Discount allowed |
Dr |
|
500 |
|
|
To DK Suppliers account |
|
|
|
86,000 |
|
(Being- cheque received and discount allowed) |
|
|
|
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
PROBLEM: 6C
GB Traders has following extracted data:
Cheque received from ST Traders Rs 57,000 after deducting 5% discount.
Required: Journal entry
[Answer: Discount allowed = 3,000]
SOLUTION:
Given and working note:
% |
= |
100 |
After 5% discount (100% − 5%) |
= |
95% |
95% amount |
= |
57,000 |
100% amount |
= |
57,000 x 100% ÷ 95% |
|
= |
Rs 60,000 |
Journal Entry
In the book of GB Traders
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Bank account |
Dr |
|
57,000 |
|
|
Discount allowed |
Dr |
|
3,000 |
|
|
To ST Traders account |
|
|
|
60,000 |
|
(Being- cheque received and discount allowed) |
|
|
|
|
|
|
|
|
|
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
PROBLEM: 6D
GB Traders has following extracted data:
Cash paid Ms Madhu Rs 29,500 and discount received Rs 500.
Required: Journal entry
[Answer: Discount received = 500]
SOLUTION:
Journal Entry
In the book of GB Traders
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Madhu’s account |
Dr |
|
30,000 |
|
|
To Cash account |
|
|
|
29,500 |
|
To Discount received account |
|
|
|
500 |
|
(Being- cash paid discount received) |
|
|
|
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
PROBLEM: 6E
GB Traders has following extracted data:
Cheque issued to MK Enterprises Rs 149,000 in full settlement of Rs 150,000.
Required: Journal entry
[Answer: Discount received = 1,000]
SOLUTION:
Journal Entry
In the book of GB Traders
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
MK Enterprises account |
Dr |
|
150,000 |
|
|
To Bank account |
|
|
|
149,000 |
|
To Discount received account |
|
|
|
1,000 |
|
(Being- cheque issued and discount received) |
|
|
|
|
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
PROBLEM: 6F
GB Traders has following extracted data:
Cheque issued to KL Traders Rs 67,200 after deducting 4% discount.
Required: Journal entry
[Answer: Discount allowed = Rs 2,800]
SOLUTION:
Given and working note:
Given and working note:
% |
= |
100 |
After 5% discount (100% − 4%) |
= |
96% |
96% amount |
= |
67,200 |
100% amount |
= |
67,200 x 100% ÷ 96% |
|
= |
Rs 70,000 |
Journal Entry
In the book of GB Traders
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
KL Traders account To Bank account To Discount received account (Being- cheque issued and discount received) . |
Dr |
|
70,000 |
67,200 2,800 |
#######
PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =
Basic Problem: 6 DISCOUNT ALLOWED AND RECEIVED
M/s NP Trading Concern has following information:
a. Cash received from Ms Anita Rs 29,500 and discount allowed Rs 500.
b. Cheque received from Kiran Suppliers Rs 59,000 in full settlement of Rs 60,000.
c. Cash received from SK Traders Rs 84,600 after deducting 6% discount.
d. Cash paid M/s EP Traders Rs 89,000 and discount received Rs 1,000.
e. Cheque issued to BK Trading House Rs 1,58,000 in full settlement of Rs 1,60,000.
f. Cheque issued to KL Traders Rs 57,000 after deducting 5% discount.
Required: Journal entries
[Answer: Discount allowed (a) Rs 500; (b) Rs 1,000; (c) Rs 5,400;
Discount received (d) Rs 1,000; (e) Rs 2,000; (f) Rs 3,000;
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