Purchased goods worth rs 5000 for cash at trade discount 20% and cash discount 5%?

Question

Answer

Calculation of Trade Discount and Cash Discount on Purchased Goods

When a business purchases goods, the supplier may offer discounts on the price of the goods. In this scenario, goods worth Rs. 5000 were purchased for cash with a trade discount of 20% and a cash discount of 5%. Let us calculate the net amount paid by the business.

Trade Discount

A trade discount is a reduction in the list price of goods or services offered by a supplier to a buyer. It is usually offered to bulk buyers or regular customers who purchase goods in large quantities or on a regular basis. The trade discount is not recorded in the accounting records of the buyer or the seller.

The trade discount offered in this scenario is 20%. Therefore, the amount of the trade discount is:

Trade Discount = List Price x Trade Discount Rate

= Rs. 5000 x 20%

= Rs. 1000

The list price of the goods is Rs. 5000 and the trade discount is Rs. 1000. Therefore, the amount payable by the business after the trade discount is:

Amount Payable after Trade Discount = List Price - Trade Discount

= Rs. 5000 - Rs. 1000

= Rs. 4000

Cash Discount

A cash discount is a reduction in the price of goods or services offered by a supplier to a buyer for paying the amount due within a specified period. It is a temporary reduction in the purchase price, which encourages the buyer to pay the amount due quickly. The cash discount is recorded in the accounting records of the buyer and the seller.

The cash discount offered in this scenario is 5%. Therefore, the amount of the cash discount is:

Cash Discount = Amount Payable after Trade Discount x Cash Discount Rate

= Rs. 4000 x 5%

= Rs. 200

The amount payable after the cash discount is:

Amount Payable after Cash Discount = Amount Payable after Trade Discount - Cash Discount

= Rs. 4000 - Rs. 200

= Rs. 3800

Conclusion

The business purchased goods worth Rs. 5000 for cash with a trade discount of 20% and a cash discount of 5%. The net amount paid by the business after the trade discount and cash discount is Rs. 3800.

Answer

It looks like a statement , what is your question ?

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