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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 Posted / aman chhabra
let me explain u ..
Trade Discount is the discount provided on bulk purchases or at the tym of purchase.
and generally trade discount is not shown in the books of accounts.
now the entry at the tym of purchase 1,00,000.
without trade discount.
Purchase A/c....Dr 100000
To vendor A/c cr 100000
and now at the tym of 5% trade discount the entry would be
Purchase A/c....Dr 95,000
To vendor A/c cr 95,000
nw see that genreally trade discount is not shown in books of account.
only amount will be effected.
Cash Discount is the discount provided for payments made
before due date and for cash purchases and this is gain and
the company is shown in the books of accounts.
so nw we to pay to vendor 90500
and cash discount received is 5 %
so the entry will be
vendor A/c....Dr 95,000
To Discount Received A/c 4,750
To cash A/c 90,250.
nw the payment made to vendor is Rs 90,250.
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