Sold goods to gokul at a list price of 4000. Trade discount10%and cash discount5%. He paid the amount on the same day and availed the cash discount ?

Question

Answer

Calculation of Trade and Cash Discount

Given Information:

List price of goods = 4000

Trade discount = 10%

Cash discount = 5%

Calculation of Trade Discount

Trade discount is calculated on the list price of goods. The formula to calculate trade discount is:

Trade Discount = List Price x Trade Discount Rate

So, in this case, the trade discount will be:

Trade Discount = 4000 x 10% = 400

Calculation of Net Price

Net price is the price after trade discount has been deducted from the list price. The formula to calculate net price is:

Net Price = List Price - Trade Discount

So, in this case, the net price will be:

Net Price = 4000 - 400 = 3600

Calculation of Cash Discount

Cash discount is calculated on the net price of goods. The formula to calculate cash discount is:

Cash Discount = Net Price x Cash Discount Rate

So, in this case, the cash discount will be:

Cash Discount = 3600 x 5% = 180

Calculation of Amount Paid

The amount paid is the net price minus the cash discount. The formula to calculate the amount paid is:

Amount Paid = Net Price - Cash Discount

So, in this case, the amount paid will be:

Amount Paid = 3600 - 180 = 3420

Explanation of Cash Discount

As per the given information, Gokul availed the cash discount of 5% by paying the amount on the same day. This means that Gokul paid only 3420 instead of 3600, which is the net price of goods. The cash discount is a type of discount that is offered to customers who pay their bills within a specified time period. In this case, Gokul paid the amount on the same day, so he was eligible for the cash discount. The cash discount is beneficial for both the seller and the buyer. The seller gets the payment on time, and the buyer gets a discount on the purchase price.

Conclusion

In conclusion, Gokul purchased goods worth 4000 at a list price and availed the trade discount of 10% and cash discount of 5%. He paid only 3420 by availing the cash discount. The cash discount is a type of discount that is offered to customers who pay their bills within a specified time period. It is beneficial for both the seller and the buyer.

Answer

1. cash A/C Dr. 3,420
Discount Allowed A/C Dr. 180
To Sales A/C 3,600
( Being goods sold and cash received)

WORKING NOTES
i. Invoices price of goods 4,000
less: trade discount @10% 400
= 3,600

less: cash discount 5% 3,600
180
= 3,420

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