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Discount entries

Parmjeet Kumar (accounts) (38 Points)

01 December 2008

Hi to all,

Please note the following transaction:

A Item is billed of Rs 100 and 10% discount on it, and vat 4% on discounted amount:

Item price : 100

Discount 10% = 90

VAT Rate : 4% ( on 90)=3.6

Payment by Cash

I am new to accounts and I think the enty will be like it:

---------------------

Cash Dr 93.6

Item Sales A/C Cr 90

VAT A/C Cr 3.6

-------------------

I want to record Discount details of Rs 10 (10%)

What will be entries of it ?

Thanks

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11 Replies

(Guest)

i think the entry will as under....

Cash a/c........Dr, 93.60

Discount a/c.......DR, 10.00

To Sales a/c 100.00

To Vat a/c 3.60

Nachiket Vasantgadkar (Finance Professional) (196 Points)
Replied 01 December 2008

The entry is correct. Only Discount given/paid should be there.

Discount given and discount received should be separate accounts for accounting purpose.

Parmjeet Kumar (accounts) (38 Points)
Replied 01 December 2008

Dear Sanjay, Nachiket

according to sanjay's entry, sale increased

without VAT = 100

with VAT (100+3.6) = 103.6

but according to me without sale is 90 (so the VAT 3.6 is made on it)

Bala (CFO, Cogzidel) (59 Points)
Replied 01 December 2008

Cash a/c.............................Dr, 93.60

Discount Allowed a/c.......DR, 10.00

To Sales a/c 100.00

To Vat a/c 3.60

Regards

Bala

www.cogzidel.in

Deepak (CA FINAL) (119 Points)
Replied 01 December 2008

Originally posted by :Parmjeet Kumar
"	Hi to all, Please note the following transaction: A Item is billed of Rs 100 and 10% discount on it, and vat 4% on discounted amount: Item price : 100 Discount 10% = 90 VAT Rate : 4% ( on 90)=3.6 Payment by Cash I am new to accounts and I think the enty will be like it: --------------------- Cash Dr 93.6 Item Sales A/C Cr 90 VAT A/C Cr 3.6 ------------------- I want to record Discount details of Rs 10 (10%) What will be entries of it ? Thanks

If it is a Trade discount it should not be recorded

and it is cash discount

Entry to book Cash Discount will be

Discount A/C....................Dr 10

To Sale 10

(Guest)

cash a/c Dr 93.60

Discount A/c Dr 10.00

Sale A/c Credit 100.00

Vat Credit 3.60

(Guest)

If it is a Trade discount it should not be recorded and it is cash discount Entry to book Cash Discount will be Discount A/C....................Dr 10 To Sale 10 if that is Cash dicount , then I think Rs. 4 Should be Vat I.e 4% on 100

Parmjeet Kumar (accounts) (38 Points)
Replied 02 December 2008

Thanks for all of you to helping me, I am account learner

According to my first post, I want to clear more:

10% is Trade Discount, but all of you said trade discount

should not recorded. Okey.

But I want to record Trade discount so I can keep track of all trade discounts given.

I am thinking of this kind of entry in my mind ( it is a picture in my mind)

----------------------------------------------------------------------------

Cash Dr 93.6

ABC A/c ( like trade discount given) Dr 10.0

To Sales A/c 90.0

To VAT A/c 3.6

To XYZ A/c (some A/c to balance ABC A/c) 10.0

----------------------------------------------------------------------------

I donn't know what will be ABC A/c and XYZ A/c, but doing so

I will be able to see ledger of ABC A/c which will help me to know the

trend of Trade discount in buisness

Note : as other masters told in theire posts, Sale A/c entry to 100.0 ,

but Sale is of 90.0 (that's why 4% VAT is 3.6 not 4.0)

I found this forum on net-search and home masters will help me.

Thanks

Parmjeet Kumar (accounts) (38 Points)
Replied 04 December 2008

Not any one to HELP ?

Parmjeet Kumar (accounts) (38 Points)
Replied 05 December 2008

Pratik khilari (CA FINAL) (75 Points)
Replied 12 September 2009

Originally posted by :sanjay agrawal
"	i think the entry will as under.... Cash a/c........Dr, 93.60 Discount a/c.......DR, 10.00 To Sales a/c 100.00 To Vat a/c 3.60	"