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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