Page 119 - Office Practice and Accounting -9

Here Kiran is receiver so his account is debited. Cash is credited because it is going
outside. Similarly discount is credited as it is income. Actually Rs. 5000 is to be paid
but only Rs. 4750 is paid so Rs. 250 discount is like income for the company.
2. Trade discount: Simply trade discount is reduction in invoice (bill) price to
encourage customers to buy bulk amount of goods. It is the net amount in
which the transactions are recorded so it is not shown in books of account.
Goods of Rs. 8000 purchased on cash from Pashupati Cheese Store at 10% trade
discount.

Date Particulars LF Dr (Rs.) Cr (Rs.)
Purchase A/c................. Dr. 7200
To Cash A/c 7200
(Being goods purchased
on cash and trade discount
received)

Here trade discount is given by seller while purchasing the goods. Though price of the
goods is Rs. 8000 the actual amount paid is Rs 7200 (i.e. 8000-8000x10%). The amount
of discount Rs. 800 is deducted from bill, so it is not shown in books of accounts.

Purchase and sale of fixed assets
Purchased furniture Rs. 12,000

Date Particulars LF Dr (Rs.) Cr (Rs.)
Furniture A/c.........................Dr. 12,000
To Cash A/c
(Being Furniture purchased for 12,000
cash )

Furniture and cash both are concerned with assets and assets are related to real A/c.
Furniture is coming in, so it is debited and cash is going out and so it is credited.

Machinery of Rs. 22000 sold.

Date Particulars LF Dr (Rs.) Cr (Rs.)
Cash A/c................................ Dr. 22,000
To Machinery A/c 22,000
(Being machinery sold for cash )

Here, machinery and cash both are assets and real account. Cash is received so it is
debited and machinery is sold and going out, so it is credited.

Office Practice and Accounting 9 115