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Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.?
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Prepare journal entries : sold goods 10% trade discount 5% cash discou...
Journal Entries for Sale of Goods with Trade and Cash Discounts
When a business sells goods, it often offers discounts to its customers to entice them to make a purchase. Discounts can come in different forms, such as trade discounts, which are reductions off the list price, and cash discounts, which are reductions for paying promptly. In this scenario, we will prepare journal entries for a sale of goods with a 10% trade discount, a 5% cash discount, and immediate payment of 45% of the list price.
Sale of Goods
The sale of goods represents the first entry we need to make. We sold goods for 90,000, but we offered a 10% trade discount, which means the customer only pays 90,000 - (10% * 90,000) = 81,000. Here's the journal entry:
| Date | Account | Debit | Credit | Explanation |
|---|---|---|---|---|
| Today | Sales | 81,000 | To record the sale of goods with a 10% trade discount | |
| Sales Discount | 9,000 | To record the trade discount given to the customer | ||
| Accounts Receivable | 90,000 | To record the customer's obligation to pay us |
Cash Discount
Next, we need to account for the 5% cash discount we offered to the customer for paying immediately. The customer paid us 45% of the list price, which means they paid 45% * 90,000 = 40,500. To calculate the amount of the cash discount, we need to apply the 5% discount to the amount the customer owes us after the trade discount, which is 90,000 - 9,000 = 81,000. The cash discount is therefore 5% * 81,000 = 4,050. Here's the journal entry:
| Date | Account | Debit | Credit | Explanation |
|---|---|---|---|---|
| Today | Cash | 40,500 | To record the customer's payment | |
| Accounts Receivable | 40,500 |
Community Answer
Prepare journal entries : sold goods 10% trade discount 5% cash discou...
Cash a/c. Dr. 34627 discount a/c. Dr. 1823 debtors a/c. Dr. 44550 To sales a/c. 81000
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Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.?
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Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.?.
Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Prepare journal entries : sold goods 10% trade discount 5% cash discount 45% amount paid immediately list price 90,000.?.
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