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 / vijay rathi
Reasons for not Recording Trade Discount is:
Since it is given at time of sales to induce bulk purchases, therefore it is regarded as reduction in Selling Price. Thus for purchaser total cost of goods becomes = Actual Price - Trade Discount
Journal Entry
Purchase A/c....Dr 9500
To Sundry Debtor/cash/bank A/c. 9500
On Other hand, Cash discount is given to prompt purchaser for early payment for goods which he has already purchased. Now since the creditors are alredy on books of Purchaser with total Value, therefore any discount received while payment to them is gain for them:
Journal Entry
Creditors A/c Dr 10000
To Cash Discount 500
To Cash/Bank 9500
| Is This Answer Correct ? | 3 Yes | 0 No |
Purchase A/C DR. RS. 95,000.00
T0 Discount A/C Rs. 4750.00
T0 Bank A\C/Cash A/c Rs. 90250.00
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / tanya
Trade discount is allowed when goods ate purchased in bulk or huge quantity. This discount is allowed both on credit as well as cash transactions. Since it is related to purchase and not to the payment.
Cash discount is allowed to the customer for making prompt or early payment. In other words, cash discount is allowed only if the customer makes payment within a fixed period. Such discount motivates the customer to make the payment earliest.
| Is This Answer Correct ? | 2 Yes | 0 No |
Answer / chintan shah
Difference between Cash Discount & Trade Discount
Cash Discount
Trade Discount
Cash Discount Account is opened in the ledger. Trade Discount account is not opened in the ledger.
Cash discount is granted by the supplier in the consideration of instant payment. Trade Discount is granted by the supplier from the list of goods or services on consideration of business.
It is allowed on payment of money. It is allowed on purchase of goods.
It is not shown in the invoice. It is shown by the way of deduction in the invoice.
It encourages prompt payment. It is allowed to encourage the sales.
This discount varies with the time period within which payment is received. This discount varies with the quantity of goods purchased.
| Is This Answer Correct ? | 2 Yes | 1 No |
Answer / jitendra kumar mishra
Trade discount is given at the time of selling goods but
cash discount is given to collect balance quicly.Entry for
this transaction will be
Purchase A/C Dr. 9500
Discount A/C 475
Cash/Bank A/c 9025
| Is This Answer Correct ? | 26 Yes | 26 No |
Answer / lalit sharma
Trade discount is deducted from the total cost. Now we have
purchase value of the product is $95,000.00. Because we
don't account trade discount in accounting. Cash discount
will be applied on $95,000.00 and accounted for accounting
as below:
Purchase A/C Dr. $95000.00
To Discount recieve A/C Cr. $4750.00
TO Cash A/C Cr. $90250.00
(Being trade discount and cash discount recieved from
customer for goods purchased in cash)
| Is This Answer Correct ? | 1 Yes | 2 No |
Answer / mohammad rashid
purcahse a/c dr 95000
To Cas/Bank 90250
To Discount Recv. 4750
(Being amount paid against purchased of goods with received trade & cash discount)
| Is This Answer Correct ? | 1 Yes | 2 No |
Answer / jyoti
Purchase A/c Dr. 9025
Discount Received A/c Dr. 425
To Cash A/c 9500
NOTE:- Trade discount is not shown in books ,Only amount of trade discount is deducted out of total amt.
| Is This Answer Correct ? | 4 Yes | 11 No |
Answer / pranjal
CASH DISCOUNT IS NEVER SHOWN IN THE JOURNAL ENTRY BUT TRADE
DISCOUNT IS SHOWN IN THE JOURNAL ENTRY.
(A)5% TRADE DISCOUNT
PURCHASE A/C DR. 9500
DISCOUNT RECEIVED DR. 500
TO CASH A/C CR.10,000
(BEING GOODS PURCHASE WITH TRADE DISCOUNT)
(B) 5% CASH DISCOUNT
PURCHASE A/C DR. 9500
TO CASH A/C CR.9500
(BEING GOODS PURCHASED)
| Is This Answer Correct ? | 59 Yes | 157 No |
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