2020 SACSS 3N POA EOY P1 Q1

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

Sales revenue

8 000

 

10 420 Dr 

      14

Sales returns

 

300

10 120 Dr 

      22

Cash at bank

 

2 300

7 820 Dr 

      22

Discount allowed

 

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]

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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  To clear excess or outdated or about to expire goods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

1.     Discount allowed

2      Discount received

 

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. √

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