Trade discount and cash discount

Page no : 2

CA Goutam Sharma (Chartered Accountant in Practice) (468 Points)
Replied 08 October 2011

Ateeq , Now you have calculated the correct figure n I REGRET for some adoption.

However, The discount for which you have explained is itself a cash discount. Trade Discount is not a matter of negotiation, it is available to all, for any trade with any one.

Actually the cash discount is negotiated between the parties and that is definately accounted

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Ashutosh Biswal (Asst.Manager Finance) (283 Points)
Replied 09 October 2011

Dear All ... Specially like to draw attention of @ Gautam and @ Ateeq

the solution of calcuation being posted in above, if you go thorugh in back to original figure of Rs 5,00,000, you can see it goes excess of that ...

here is the way i would like to correct ...

Rs 133750 (Divide the same by 102 and multiply by 100) will come Rs 131127 and subtracting both to get the cash discount amount as Rs 2623 ..... (1)

Entry : Debits to .... Bank Rs 20,000 , Cash Rs 111127, Discount Rs 2623

credits to ... Sandeep Rs 133750

And if rest of the installments will be paid in 2/4, 3/4 and 4/4 way .. then Rs 113750 (455000/4) with 2% cash discount, then all will be journalised as below..

Entry : Debits to ... Cash Rs 111520 , Discount Rs 2230

Credits to .... Sandeep Rs 113750

( Note - Divide Rs 113750 by 102 and multiply by 100, will come 111520 subtracting both to get the cash discount of Rs 2230)

it's appreciated welcome to everyone to comment on this to correct me if i m wrong...

CA Goutam Sharma (Chartered Accountant in Practice) (468 Points)
Replied 09 October 2011

Dear all,,,,

I think we all are satisfied upto the calculation of Rs. 133750.

Ashutosh, I think , you have assumed the above figure inclusive of discount. However the above amont is only the actual payment.

suppose if I wants to clear a debt of Rs.10 and the creditor is ready to give discount of 2%,then I will only pay Rs.9.80. ie 98% of the total debt. Therefore whatever will be my payment, it will be treated as 98% for the caculation of discount.

So I belive, Ateeq's latest post is fair & correct