Journal Entry: Full Settlement, Discount Allowed, Discount Received

 

How to make journal entry for full settlement, discount allowed and discount received

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

 

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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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