Question

Purchased goods worth 1600 less 20% trade discount and 5% cash discount from Mahesh for cash and supplied them to Ramesh atleast price less 10% trade discount.

What is the journal entry?

Answer 1

The journal entry for the given transaction involves debiting and crediting multiple accounts to record the purchase and sale of goods with various discounts.

Step-by-step explanation:

The journal entry for the given transaction would be:

1. Debit: Purchases Account - $1,600
2. Credit: Cash Account - $1,280
3. Credit: Trade Discount Account - $320
4. Debit: Accounts Receivable Account - $1,440
5. Credit: Sales Account - $1,600
6. Credit: Trade Discount Account - $160
7. Debit: Cash Account - $1,280
8. Debit: Cash Discount Account - $80

This journal entry reflects the following:

• The purchase of goods worth $1,600 less a 20% trade discount ($320), resulting in a cash payment of $1,280.
• The sale of the goods to Ramesh at a discounted price of $1,440 after applying a 10% trade discount ($160).
• The receipt of cash from Ramesh ($1,280) as well as the cash discount offered ($80).