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 


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