Class 11 Accountancy - Chapter Recording of Transactions - 2 NCERT Solutions | What is difference between trade discoun
What is difference between trade discount and cash discount?
Trade Discount
1) This discount is allowed by wholesaler or manufacturer to the retailer at a fixed percentage on the listed price of goods.
2) It is allowed when goods are purchased in bulk, i.e., large quantity.
3) It is not recorded separately in the books of accounts.
4) For example, if a trader sells goods of the list price of ₹1,00,000 at 20% trade discount for cash, the entry will be:-
| Cash A/c Dr. | 80,000 | |
| To Sales A/c | 80,000 |
Cash Discount
1) Cash Discount is allowed if the customer makes the payment immediately or within a fixed period.
2) It is allowed when payment is made on or before a specified date.
3) It is recorded separately in the books of accounts.
4) For example, if a trader sells goods of the list price of ₹20,000 at 10% trade discount and 2% cash discount, the net amount will be calculated as under: ₹
List Price 20,000
Less: Trade Discount @ 10%. 2,000
18,000
Less:. Cash Discount @ 2%. 18,000 × 2/100 360
17,640
It means that ₹17,640 will be paid if the payment is made in cash.
More Questions From Class 11 Accountancy - Chapter Recording of Transactions - 2
- Q:-
Total of these transactions is posted in purchase account :
(i) Purchase of furniture
(ii) Cash and credit purchase
(iii) Purchases return
(iv) Purchase of stationery - Q:-
Briefly state how the cash book is both journal and a ledger.
- Q:-
State whether the following statements are True or False :
(a) Journal is a book of secondary entry.
(b) One debit account and more than one credit account in a entry is called compound entry.
(c) Assets sold on credit are entered in sales journal.
(d) Cash and credit purchases are entered in purchasejJournal.
(e) Cash sales are entered in sales journal.
(f) Cash book records transactions relating to receipts and payments.
(g) Ledger is a subsidiary book.
(h) Petty cash book is a book having record of big payments.
(i) Cash received is entered on the debit side of cash book.
(j) Transaction recorded both on debit and credit side of cash book is known as contra entry.
(k) Balancing of account means total of debit and credit side.
(l) Credit purchase of machine is entered in purchase journal. - Q:-
Credit balance of bank account in cash book shows :
(i) Overdraft
(ii) Cash deposited in our bank
(iii) Cash withdrawn from bank
(iv) None of these - Q:-
When a firm maintains a cash book, it need not maintain ;
(i) Journal Proper
(ii) Purchases (journal) book
(iii) Sales (journal) book
(iv) Bank and cash account in the ledger - Q:-
The periodic total of sales return journal is posted to :
(i) Sales account
(ii) Goods account
(iii) Purchases return account
(iv) Sales return account - Q:-
Double column cash book records:
(i) All transactions
(ii) Cash and bank transactions
(iii) Only cash transactions
(iv) Only credit transactions - Q:-
Fill in the Correct Words :
(a) Cash book is a ......... journal.
(b) In Journal proper, only......... discount is recorded.
(c) Return of goods purchased on credit to the suppliers will be entered in ...... Journal.
(d) Assets sold on credit are entered in .........
(e) Double column cash book records transaction relating to ......... and .........
(f) Total of the debit side of cash book is ......... than the credit side.
(g) Cash book does not record the ......... transactions.
(h) In double column cash book ......... transactions are also recorded.
(i) Credit balance shown by a bank column in cash book is .........
(j) The amount paid to the petty cashier at the beginning of a period is known as ......... amount.
(k) In purchase book goods purchased on ......... are recorded. - Q:-
Goods purchased on cash are recorded in the :
(i) Purchases (journal) book
(ii) Sales (journal) book
(iii) Cash book
(iv) Purchases return (journal) book - Q:-
What is petty cash book? How it is prepared?
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As an accountant of a company, you are disappointed to learn that the totals in your new trial balance are not equal. After going through a careful analysis, you have discovered only one error. Specifically, the balance of the Office Equipment account has a debit balance of 15,600 on the trial balance. However, you have figured out that a correctly recorded credit purchase of pendrive for 3,500 was posted from the journal to the ledger with a 3,500 debit to Office Equipment and another 3,500 debit to creditors accounts. Answer each of the following questions and present the amount of any misstatement :
(a) Is the balance of the office equipment account overstated, understated, or correctly stated in the trial balance?
(b) Is the balance of the creditors account overstated, understated, or correctly stated in the trial balance?
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