Question

Please explain about Purchases Discounts and Purchases Returns and Allowances. Please indicate the purpose of these accounts. Do they appear on the Financial Statements?

2. Please explain about Sales Discounts. Why are they necessary? Does this account appear on the Financial Statements?

3. How are sales to customers using credit cards recorded?

4. Please create an example of an Income Statement for a merchandising business.

Answer 1

Ans: Given tha For -He Purpose of accounting, discoun are Trade discount Tiade discount s normal lyd rece ved alloved on bpuchase, ve do no have to put any discount when we receve discount while putchasin or Selling goods) sC s。mply clad u cl -the amconl ep trade discount and jounal enky n the bocks of accounls fo n -the books of accos sade allou an balonte amcunt s re corded Soppose m puchased od 000o and received a aole discoont of 10 on ti 7hen ?n the bookg of accoonf ofmi.x, んe record (10000-10%ofioooo ),49000 es pochase..e be util bpurchase aceount by 4 9000 ond ed the cash

account (t purchased in cash) 1respe credtto account purchosed tn cred:)w wll give a naTYa tion, wheve we have to menHon the delalls of trade d:s count ·e the vale af trade discount and the omoon n hich such dts coun hve Yeceied The auol eny should be pochase Accoon DY oo Betng goods puYcha sed n casy cred:t and Trade Dis count do not appearn the finonciat discount, nor we pa 8s any journal enky for sucih To coshl cred: toy Accoun 44000 re ce?red a trade discount ar 10% on 410000) staleme n , we do not veale any Redger for this amount ap discount, heues tionof appeaio ฝ้า -the financial statemen, do not appear Ho wever, în ques foon, 와 ?s not mentioned uhelheγ \ ga hade discount or cash dis count,

ke ultI always assume t to be a cash discoont 3 b) cash Discon: cash dis coun genealy gven So tha purchagev make s Payment earl녘 for.the sake t of dues) 않을s eco (ded ?n -the books of of Teceiving a discount,s alloued fo pomp pa y men arcount by craing eporate ladg ey, Thrs di stounk s Yece ved or allowed shen pay me re ce'yed, f trade discovnl alo received or allowed alonh cash drscounl, -hen cash discoonb ent 9 made or is calculałed after. dedv cling discoont calcvlaled on the net amoun trade discount Rom nvoice price .2 cas Suppose mTY puchased gods worth $5000 Cash and eceived a cash discount of 5%then, we have to de bit purchase Account by credit Cash Accountb Rece, ved Accoonl bǎ 42.50 and 4750 and DiScoun

The Journl eny should be purchase Accoont DT. 4 5000 To cash Accoon 4 u2so To piscount Recelved so (Bern dspurchasedn cash and discoun received @ 5%). pow suppose, a problem appears んhere we given both dvade discoonk and cash discoont, Exo mple mr .Χ purchased goods woith 5000 o and received a trade discount of 10% and cash discount op 5% hen entry shou ld be puYchase Accoont DY 445000 io cash Accoonl 4 u2 350 To Discount ceyed 19950 (Being goods purc hased n cash and teceive d a trade dis count o.p ๒% and cas discount of 5%)

cash discoon in. Ernancial sta le nenk ash discount appears sp cash dis conallowed, thenappear 08 Discount Allowed unde INDIRECT ENDENSbs, appea as discoun receved unde N DIRECT INCOMES. discounl is se ceved,hen 4 putchase Returns: means o od tha wa purchased earlie γ , but noo reforning 않 tu pufchase puychase etoTns ha d the sellet, we normally Te torn ods pCh when the goods veceived are different fom those hal we had ordered, Whe damaged, any othe reasons as may be Spedfted ood9 Yeceive goo enkeǐe ea lier hen the amoont o goods gels Yeduced and to pas8 jouinal enky t0 the book af account, we do not credit purchase Acount, so foT Te cording this thus we have issues, he create a separate ledger account named purchage retosn Accountor "etun out wards ctount

ohen goods are retorned to he selle, -then ke credit porchase Retun Account by the amount cf goodsre turned and de bit the respeckve creol tor. C6 suppese, my. eos seaods Purchased a liet, wo1th 100o to mYy The sour nal eny should be mTy Account lered tor or 1000 o purchose Retuins Account lo00 Being goods eturned 9. sales Di s couns sale dis counk means discoon that ue alloko while seltng goods, These disounis are same as discussed above whtle purchasin we eceived dis coun and while selling,e allow disc oun Trade discoun we do not re cord the amovnlop trade discount whỉ le selling goods too, kesinply

de duck the amount af trade discov and re cord the balance amount o sqle s, ths 93 same as discuSSed aboye Suppose, γ , y sells goods woth $1000 a trade discount of 10% onot, ho) in he books f account of T.X e o in the books e acoont of T be l 1ecord 4he lollere d않 "the sales account b de bit the cash account Cip sold n cash sales i. 9000 an give a na ra Hon, whewe we have to men tien the detals of tr a de discovn tade dis count and -the amount on which the fate or alto wed The ovinal enhu should h cash/ Debtoǐ Accou Dr. 루 9000 "To sales Accounf 9000 Bein goods sold in cash I credit and allowed kade dis coun1t 10% ơn a

hade discoun do not appe ar n financial slałemen s, we do not tedger for -this discount, noy we create an pass anj Journal enhy POrsch amount of dis coonb -the qu' es ↓우on af -the financial so appearing Statemen o not ppear However,upin gues fon, 's not m entione d whether 's is a tade dis count or cash, dis co ont) ㆃ임! alusays assume 안 to be o cash discount Cash scoun "the pu¥pose of this dis count 's discussed abore, t s allowed o prompt paymen of dua, recorded Sn -the books ơf account by creating 0กา a u men a -separate ledger,-th's account reccived whe ถ payment s made eceived, rade dis coon s aso receie o alloived along wth cash discount calcvlale on the net amoon

门 soppose, Mr. y sold goods woǐњ 5000 ) of 5%, then, and allo wed a cash dis coun eas be have to credi the sales Account by 4 5000 and debit cash ccount bydjU350 and discoun Allowed ACCoUn by 250 he ournal enty should be cash Account DY- 4750 Discount allowedのccount DY,3250 To sales Account 5000 (eing goods has cash and discoun rece,red ( 5%) O suppose, given boh tsade discount and cash discount, a pro ble m apears w here ae are EXample. MYa Sold goods oorth $500o and allowed a trade dis count af to% and cash discon

The enky sheuld be Discoun Allowed Accoun! Dr $ 950 TO sales ACOUn 4u5000 To so1d Being goodls in cash and alloweda trade discount o! 10% and cash disco ont of 5%) cash oiscounks appears n the fina ncial stalemens, e cash discoont s allo wed, then appe a as iscount Alowed under N DIRECT ENPENS6 9P cash dis coont s e ceived, then appear as Dis coun Re ceier undey 1ND IPECT 2N COMES, 3. Soles to lustomers using cred:1 are re coγ ded as notmal sales the customer s fnsłan paying he foil amount tor the yoods pu chased using credif cards, then H ur chased be re corda d a no mal sales, Howeret, the castomer sing credit cords mates payment ns talmen

0 ihen lhe custome emain my ebfo + the ast nstalment nt all his pay men aek cleared "The customer aft appear as a debtor -6ǐ the balance amound due, -his rs gel to be vece iYed Aom such cvstomer