CA Foundation · Accounting · Inventories
Radha & Co. purchases raw materials on 15th November for ₹50,000 with credit terms of 2/10, net 30. The invoice is dated 15th November. Under the net method of recording purchases, what amount would be recorded in the purchase journal on 15th November?
Under the net method of purchase recording, purchases are recorded at the amount after deducting the expected early-payment discount. Here, 2% of ₹50,000 = ₹1,000 discount, so the recorded amount is ₹49,000. This method assumes the discount will be taken.
- A₹50,000
- B₹49,000Correct
- C₹51,000
- D₹50,000 less the discount already taken
Explanation
Under the net method, purchases are recorded at the discounted price assuming the discount will be taken. The discount is 2% of ₹50,000 = ₹1,000. Therefore, recorded amount = ₹50,000 − ₹1,000 = ₹49,000. This method recognizes that payment within 10 days is the normal expectation. Recording at full price (option 0) is the gross method instead.
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