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CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger

A trader purchased goods worth Rs 50,000 from Suresh at 10% trade discount and paid Rs 44,100 in full settlement, getting a cash discount. What is the cash discount received, and the amount credited to Suresh in the purchase entry?

The cash discount is Rs 900 and Suresh is credited Rs 45,000. Trade discount of Rs 5,000 is deducted at the time of purchase, leaving Rs 45,000 payable. Paying Rs 44,100 in settlement means Rs 900 is the cash discount received, recorded in the books.

  1. ACash discount Rs 900; Suresh credited Rs 45,000Correct
  2. BCash discount Rs 900; Suresh credited Rs 50,000
  3. CCash discount Rs 5,000; Suresh credited Rs 45,000
  4. DCash discount Rs 5,900; Suresh credited Rs 44,100

Explanation

Trade discount is deducted at the time of purchase: 50,000 - 5,000 = 45,000, which is credited to Suresh and debited to Purchases. Cash paid was 44,100, so discount received is 45,000 - 44,100 = 900. Option C treats the trade discount as cash discount and option B ignores the trade discount.

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