TRADING COMPANY 2 Credit Transactions CREDIT TRANSACTIONS Credit

TRADING COMPANY (2) Credit Transactions

CREDIT TRANSACTIONS

Credit Purchases Transactions No. 1 Transactions Journal ABC bought goods, $ 5 000, on Purchases credit from Charlie and paid the Charlie carriage of $ 10 with cash Carriage inwards Cash 2 ABC returned broken goods to Charlie, $ 100 3 ABC paid the remaining debts to Charlie with cash Cash *(5 000 – 100) 5 000 10 Charlie 100 Purchases Returns 4 900* 5 000 10 100 4 900*

Credit Sales Transactions No. 1 Transactions ABC sold goods, $ 6 000, on credit to Mario and paid the carriage of $ 15 with cheque Journal Mario 6 000 Sales Carriage outwards 15 Bank 2 Mario returned broken goods to Sales Returns ABC, $ 50 Mario 3 ABC received payment for the remaining debts from Mario with cheque Bank Mario *(6 000 – 50) 50 5 950* 6 000 15 50 5 950*

CASH VS TRADE DISCOUNT Trade Disc. Cash Disc. • Discount given/ received for cash transaction at the time the goods were sold or bought. • No need for recording in separate account • Discount given/ received for credit transaction at the time the payment is given or received on time • Need for recording in separate account (Discount allowed & Discount received)

Credit Purchases Transactions with Discount No. 1 Transactions ABC bought goods, $ 5 000, on credit from Charlie Journal Purchases Charlie Carriage inwards Cash 5 000 10 2 ABC returned broken goods to Charlie, $ 100 Charlie 100 Purchases Returns 3 ABC paid the remaining debts on time to Charlie with cash, after deducting a discount of 2 % Charlie 4 900* Discount Received 98** Cash 4 802*** *(5 000 – 100) **(2% x 4 900) ***(4 900 -98) 100

Credit Sales Transactions with Discount No. 1 Transactions Journal ABC sold goods, $ 6 000, on credit to Mario and paid the carriage of $ 15 with cheque Mario 6 000 Sales Carriage outwards 15 Bank 2 Mario returned broken goods to ABC, $ 50 Sales Returns Mario 3 ABC received payment for the remaining debts on time from Mario with cheque less a cash discount of 2 % Bank 5 831*** Discount Allowed 119** Mario 5 950* *(6 000 – 50) **(2 % x 5 950) ***(5 950 – 119) 50 6 000 15 50

EXERCISE

Exercise Prepare a General Journal & Cash Book of Mamata from these transactions: 2012 Mar 1 Commenced business with capital of $ 50 000. 40 % of that went to cash, the remaining went to bank account. 4 Bought goods, $ 5 200, on credit from Lodi Road Traders. 8 Returned goods, $ 200, to Lodi Road Traders. 12 Sold goods, $ 770, on credit to A & J Singh. 14 Cash Sales $ 680. 17 Paid $ 650 cash into the business bank account. 21 Received a cheque from A & J Singh in settlement of their account. 24 Sold goods, $ 1200, on credit to North East Stores. 28 Paid Lodi Road Traders the amount due, by cheque, after deducting a discount of 2. 5 %. 31 North East paid the amount due by cheque less a cash discount of 3 %. • Submit 2 April 2012 : )

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