2020 SACSS 3N POA EOY P1 Q1
1 Almanda owns a trading firm. The following are business transactions with Trisha for the month of December 2019.
Trade receivable – Trisha account
Date | Particulars | Dr | Cr | Balance |
2019 | $ | $ | $ | |
Dec 1 | Balance b/d | 2 420 Dr | ||
10 | 8 000 | 10 420 Dr | ||
14 | 300 | 10 120 Dr | ||
22 | Cash at bank | 2 300 | 7 820 Dr | |
| 22 | 120 | 7 700 Dr | ||
2020 | ||||
Jan 1 | Balance b/d | 7 700 Dr |
REQUIRED
a. Explain one difference between a trade discount and a cash discount.
[2]
b. Explain to the owner, Almanda, the entries as shown in Trade receivable – Trisha’s account.
[5]
2019 | Narration |
Dec 1 | |
10 | |
14 | |
22 |
[TOTAL 7]
Trade Discount is given by the seller of goods to the buyer at the point of sale. | Cash discounts are given by the credit supplier to the credit customer at the point of payment. |
1. To encourage the customer to buy in bulk.
2. To encourage customer patronage and loyalty
3. To clear excess or outdated or about to expire goods | To encourage credit customer to pay promptly before the cash discount period. |
Trade Discount is a deduction from the list price of goods sold. | Cash Discount is a deduction from the amount owing by the credit customer. |
Trade discount is not recorded in any ledger account. | Cash discount is recorded in respective accounts affected Either as |
2019 | Narration |
Dec 1 | Amount owing by Trisha $2420.√ |
10 | Sold goods on credit to Trisha $8000. √ |
14 | Trisha returned goods $300. √ |
22 | Received cheque of $2300 from Trisha √ after deducting cash discount of $120. √ |