Question

The Giles Agency offers a 8% trade discount when providing advertising services of $1,000 or more to its customers, Audrey's Antiques decides to purchase advertising services of $2,400 (not including the trade discount), while Michael's Motors purchases only $590 of advertising. Both services are provided on account. Record both transactions for The Giles Agency, accounting for any trade discounts. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet < 1 2 Record the services provided to Audrey's Antiques, Note: Enter debits before credits General Journal Debit Credit Transaction 1 Record entry Clear entry View general Journal

Answer 1

Solution:

(Amount in $)

Trade Discount is a type of discount which is offered by the supplier over list price. The main objective of the trade discount is to increase sale volume. This discount is not recorded in books of account And Purchase of goods or service are recorded at Net Value ( Gross value - trade discount)

Part A:

Journal entry in the Book of Audrey's Antiques

Date	Particular	Amount Dr.	Amount Cr.
	Advertisement Expenses A/c. Dr	2,208
	To Giles Agency (Account payable)		2,208
	( Being Advertising services purchased on account worth $2,400 and trade discount received $192 (8%)

Part B:

Journal entry in the Book of Michael's Motor

Date	Particular	Amount Dr.	Amount Cr.
	Advertisement Expenses A/c. Dr	590
	To Giles Agency (Account payable)		590
	( Being Advertising services purchased on account worth $590)

Note:

1. A cash discount is another type of discount which is offered by the supplier for prompt payment. This is also called early payment discount and this cash discount is recorded in books of account, unlike trade discounts.