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

Anita Traders purchased goods worth Rs 40,000 from Gupta on credit and later paid Rs 38,000 in full settlement, getting a discount for the remainder. Which ledger posting for the payment is correct?

Debit Gupta's account Rs 40,000, credit Cash Rs 38,000 and credit Discount Received Rs 2,000. The creditor's full liability is cleared, cash decreases by the amount paid, and the discount received is a gain for the buyer.

  1. ADebit Gupta Rs 40,000; credit Cash Rs 38,000; credit Discount Received Rs 2,000Correct
  2. BDebit Gupta Rs 38,000; credit Cash Rs 38,000
  3. CDebit Gupta Rs 40,000; credit Cash Rs 38,000; debit Discount Allowed Rs 2,000
  4. DDebit Cash Rs 38,000; debit Discount Received Rs 2,000; credit Gupta Rs 40,000

Explanation

Gupta is a creditor, so settling the Rs 40,000 liability is a debit to his account. Cash goes out at Rs 38,000 (credit) and the Rs 2,000 saving is a gain, credited as Discount Received. Option 3 wrongly treats it as discount allowed, which applies to customers.

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