DISCOUNT AND TYPES OF DISCOUNT
Discount:- The reduction of price of goods allowed by a seller to his customer is called discount. Ex-Good sold to Mr.X Rs 5000 in cash and gives discount 10% . Discount=5000×10÷100=500 Types of Discount:- 1)Trade Discount :It is calculated on Gross price or list price or catalogue price 2) Cash Discount :It is calculated on Net price of goods. Net price=Gross price-Trade discount Let's under both types discount through this example 1) Goods sold to Mr. P Rs 100000 allowed trade discount 10% and cash discount 10%. Solution: Trade discount=100000×10÷100=10000 Cash discount=(100000-10000)×10÷100=9000 Note:1) No entry is passed for Trade discount 2)Entry is passed for Cash Discount