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Difficult journal entry

akash (no) (160 Points)

01 August 2012

please experts help me.

we have made a sales amounting to Rs. 5,00,000 as on 30th march 2012 on a condition that if our debtor pay this amount before 5 april 2012 he will get 10 % discount , due to this our debtor paid this amount as on 2nd april 2012, now how will we pass journal entries from begning in our books according to prudence princple.

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CA Sanjay Bag (CHARTERED ACCOUNTANT) (3340 Points)
Replied 01 August 2012

As on 30.03.2012 Debtors Account .............Dr. 5,00,000.00

To, Credit Sales Account 5,00,000 00

As on 02.04.2012 Bank Acconut ................................Dr. 4,50,000.00

Discount Allowed Account..........Dr. 50,000.00

To, Debtors Account 5,00,000.00

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 01 August 2012

Agree With Sanjay

akash (no) (160 Points)
Replied 01 August 2012

Originally posted by : Sanjay Bag
	As on 30.03.2012 Debtors Account .............Dr. 5,00,000.00 To, Credit Sales Account 5,00,000 00 As on 02.04.2012 Bank Acconut ................................Dr. 4,50,000.00 Discount Allowed Account..........Dr. 50,000.00 To, Debtors Account 5,00,000.00

But we have to make provision for doubtfull debts how will we pass journal entry for provision.

Chiradeep.R.H (Chirahi & Associates - Consultants) (240 Points)
Replied 01 August 2012

Dear Akash,

Amount will be lying in name of debtor and why you need provision entry for that.

CA Sanjay Bag (CHARTERED ACCOUNTANT) (3340 Points)
Replied 01 August 2012

Hi, Akash we need not me make any provision for doubtful debt, because it is a good debt. So there is no question of being doubtful. To consider a debt as doubtful you have to wait for certain minimum period.

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Dev (Article Trainee.) (608 Points)
Replied 01 August 2012

As u said debtor paid amount on 2nd april to get benefit of discount.. Why need provision for doubtful debt? ? Account was settled when he paid amount after deducting discount declared by seller.. However provision for discount on debtor..may possible..but not very sure on this case..still trying... Experts plz Correct me if i m wrong,, .. When sale took place 1)Debtor a/c Dr. 500000 To sales a/c 500000 2) when seller makes provison @ 10% for discount on debtor --- P/L a/c Dr. 50000 To provision for discount a/c Dr 50000 3) when debtor paid and discount allowed.. CASH/BANK a/c Dr. 450000 Provision for discount a/c Dr. 50000 To Debtor a/c 500000.. is it possible..??

shibu (Accountant) (325 Points)
Replied 02 August 2012

You are wrong Mr Devsh. Do not overlook things.

The question was resolved correctly by others.

Santosh V. Thakur (Sr. Accountant) (187 Points)
Replied 02 August 2012

I agree with Mr.Sanjay Bag, no need to provision entry.

Nagarajan DK (CA) (103 Points)
Replied 02 August 2012

Dear shibu sir,

I agree with you.

But why the provision should not be made. Please clarify.

Santosh V. Thakur (Sr. Accountant) (187 Points)
Replied 02 August 2012

Dear Mr.Nagrajan,

Can you explain full entry with provision of discount.

thanks in advance.

shibu (Accountant) (325 Points)
Replied 02 August 2012

Till 2nd April, the receipt of money is not sure. Discount is allowed for receipt of money which is an expense for the FY 2012-13. Hence no provision of dicount.

CA Sanjay Bag (CHARTERED ACCOUNTANT) (3340 Points)
Replied 02 August 2012

I think Devesh is correct, a provision for discount may be done.

CA Sanjay Bag (CHARTERED ACCOUNTANT) (3340 Points)
Replied 02 August 2012

Clarification regarding Provision for Discount Allowed: Dear all, if we know we have to pay discount if the party made his payment within the stipulated then I think in a conservative way it is more suitable to make a provision for discount .