Accounting Equation Entry for Sale of Goods with Trade Discount

Step 1: Identify the Transaction
The transaction is the sale of goods with a trade discount.

Step 2: Determine the Amount of Sale
The sale price is Rs. 30,000.

Step 3: Calculate the Trade Discount
The trade discount is 10% of the sale price, which is Rs. 3,000.

Step 4: Determine the Cost of Goods Sold
The cost price of the goods is Rs. 25,000.

Step 5: Calculate the Gross Profit
The gross profit is the difference between the sale price and the cost price, which is Rs. 5,000.

Step 6: Record the Transaction in Accounting Equation
The accounting equation for the sale of goods with a trade discount is:

Assets = Liabilities + Equity

The entry in accounting equation would be:

Assets
Cash: Rs. 27,000 (30,000 - 3,000)

Equity
Sales Revenue: Rs. 30,000
Less: Trade Discount: Rs. 3,000
Net Sales Revenue: Rs. 27,000
Cost of Goods Sold: Rs. 25,000
Gross Profit: Rs. 5,000

Explanation:
The transaction involves the sale of goods, which is recorded in the income statement as sales revenue. However, since a trade discount is given, the actual revenue earned is lesser than the sale price. Therefore, the trade discount is deducted from the sales revenue to arrive at the net sales revenue. The cost of goods sold is the cost price of the goods sold, and the gross profit is the difference between the net sales revenue and the cost of goods sold. The cash received from the sale is recorded as an asset in the accounting equation.

Cash a/c Dr. 27000 to sales a/c. 27000