Question
What is Trade Discount? Give an example.
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Answer
Trade Discount Trade Discount is a discount allowed by the seller on purchase of goods in large quantity. It is normally allowed by the seller to the purchaser who further sells goods to the consumer. It is deducted in the invoice from sale price and is not recorded in the books of account. Sale is recorded at the net value, i.e., sale price less trade discount For example, Amit sells goods to Vikas of ₹ 10,000 allowing him trade discount of 20%. The invoice will be prepared for net amount ₹ 8,000, i.e., after trade discount. Amit will pass following Journal entry in his books of account:Images.
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What is Noting of a bill of exchange.
Enter the following transactions in the Journal of Ganesh Bros.:
|
2017
|
|
₹
|
|
March 3
|
Sold goods to Dev
|
1,00,000
|
|
March 5
|
Received from Dev in full settlement of his account
|
98,000
|
|
March 6
|
Sold goods to Manmohan
|
80,000
|
|
March 8
|
Manmohan returned goods
|
1,000
|
|
March 15
|
Received from Manmohan in full settlement of his account
|
78,200
|
| March 16 | Received cash from Ram and | 19,500 |
| Discount allowed | 500 | |
| March 20 | Paid cash to Pawan and | 4,700 |
| Discount received from him | 300 | |
|
March 25
|
Sold goods to Varun of the list price of ₹ 25,000 at 20% trade discount
|
|
Pass the Opening Entry from the following Balance Sheet as at 31st March, 2019 of Vikas:
Cash Basis of Accounting is not a better basis for depicting the correct financial position of an enterprise. Do you agree? Give reasons in support of your answer.
Show the accounting equation on the basis of the following transactions and present a Balance Sheet of the last new equation balance:
| (₹) | ||
| i. | Mohan commenced business with | 70,000 |
| ii. | Purchased goods on Credit | 14,000 |
| iii. | Withdrew for private use | 1,700 |
| iv. | Purchased goods for Cash | 10,000 |
| v. | Paid wages | 300 |
| vi. | Paid to Creditors | 10,000 |
| vii. | Sold goods on Credit at par | 15,000 |
| viii. | Sold goods for Cash (cost price was ₹ 3,000) | 4,000 |
| ix. | Purchased furniture for cash | 500 |
Why should a business follow the consistency Concept?
Enter the following transactions in the Journal of Manohar Lal & Sons:
|
2019
|
|
₹
|
|
Jan. 6
|
Sold goods for cash |
36,000
|
|
Jan. 8
|
Sold goods to Hari |
30,000
|
|
Jan. 14
|
Received cash from Hari
|
18,000
|
| Jan. 26 | Received Commission |
750
|
|
Jan. 27
|
Paid Salary to Gopal |
1,200
|
|
Jan. 28
|
Received cash from Hari |
12,000
|
|
Jan. 29
|
Withdrew cash from office for personal use |
4,000
|
|
Jan. 30
|
Wages paid |
7,200
|
| Jan. 30 | Bought Machinery for Cash | 8,000 |
Pass Journal Entries for the following transactions:
- Provide depreciation on Furniture ₹ 500 and on Machinery ₹ 2,000.
- Received cash ₹ 1,000 for bad-debts written off last year.
- Ajay Singh was declared bankrupt. He owed ₹ 2,500 to us. Nothing could be recovered from his estate.
- ₹ 20,000 for wages and ₹ 4,000 for salaries are outstanding.
- Purchased furniture for ₹ 6,000 for the proprietor and paid the amount by cheque.
- Provide 9% interest on capital amounting to ₹ 2,00,000.
- Charge interest on drawings ₹ 1,000.
On 1st April, 2019, the position of Rahman was as follows: Cash-in Hand ₹ 11,200; Cash at bank ₹ 2,57,600; Bills Receivable ₹ 68,800; Jai Ram (Dr.) ₹ 16,000; Ram Kumar (Dr.) ₹ 48,080; Office Furniture ₹ 52,800; Stock-in-Trade ₹ 4,16,000; Doulat Ram (Cr.) ₹ 1,74,720, Hari Ram (Cr.) ₹ 2,16,960; Bills Payable ₹ 80,000. What was the amount of capital of Rahman on that date? Pass the Journal entry to Open his books.
Mr. Abhinav Kumar, a homeopath doctor in practice has been advised by his Accountant to maintain his accounts on Accrual Basis instead of the presently followed Cash Basis of Accounting. Do you agree with the advice of the Accountant? Give reasons.