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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 / 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)
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