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Sold goods to mohan of the list price of 5000 subject to 10% trade discount abd 5 % cash discount . Mohan availed cash discount. What is the journal?
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Sold goods to mohan of the list price of 5000 subject to 10% trade dis...
Journal Entry for Sale of Goods with Trade Discount and Cash Discount
Introduction
When a company sells goods to a customer, it may offer a trade discount and/or a cash discount. A trade discount is a reduction in the list price of the goods, while a cash discount is a reduction in the amount the customer owes if they pay within a certain period of time. In this scenario, goods were sold to Mohan at a list price of 5000 subject to a 10% trade discount and a 5% cash discount.
Journal Entry
The journal entry to record the sale of goods with trade and cash discounts is:
Debit: Cash (Amount received after cash discount)
Debit: Sales Discount (Amount of cash discount)
Credit: Accounts Receivable (Amount before cash discount)
Credit: Sales Revenue (Amount after trade discount)
Explanation of Journal Entry
The journal entry debits cash and sales discount, and credits accounts receivable and sales revenue. This is because:
- The cash account is debited because the company received cash from the customer.
- The sales discount account is debited to record the discount given to the customer for paying within a certain period of time.
- The accounts receivable account is credited because the customer owes the company money.
- The sales revenue account is credited for the amount of the sale after the trade discount has been applied.
Conclusion
The journal entry for the sale of goods with trade and cash discounts involves debiting cash and sales discount, and crediting accounts receivable and sales revenue. It is important for companies to accurately record these transactions in their accounting system to ensure that their financial statements are accurate.
Community Answer
Sold goods to mohan of the list price of 5000 subject to 10% trade dis...
Mohan account dr by 4250 , discount availed by 250 and sale account by 4500
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Sold goods to mohan of the list price of 5000 subject to 10% trade discount abd 5 % cash discount . Mohan availed cash discount. What is the journal?
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