Answer Posted / imran malik

Trade discount is not shown in accounting books but still it
is calculated and subtracted from the principle amount and
the remaining amount (result) becomes the principle amt at
which cash discount would be calculated and shown in the
accounting books:
Sol:
Given: Goods sold @100000
Therefore, TD= 100000*(5/100)=5000
Selling price= Principle amt - TD
= 100000 - 5000
= 95000
Now, CD would be applied on the above answer, i.e on 95000
Therefore CD = 95000 * (5/100)
= 4750
Cash Received = 95000 - 4750
= 90250
Journal Entries:
Purchase Goods A/C Dr 95000
---- To Cash A/C 90250
---- To Discount Received 4750

Hope the answer is right

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