Question No 17 Chapter No 8 - T.S. Grewal 11 Class

Question No 17 Chapter No 8

M/s Vaish Trader, Delhi purchased 500 Parker Pens @ Rs 200 each less trade Discount @ 15% from luxor Pens Ltd., Delhi. CGST and SGST was levied @ 6% each. Further, Cash discount was allowed @5% as the payment was made within specific time. What will be the amount of trade discount and cash discount?

Solution: –

Gross Purchase Price = 500*200
= 1,00,000/-

Trade Discount = Purchase Price * % of discount
= 1,00,000 * 15%
= 15,000/-

Net Purchase Price = Gross Purchase Price – Discount
= 1,00,000 – 15,000
= 85,000/-

Amount of CGST = Net Purchase Price * % of CGST
= 85,000* 6%
= 5,100/-

Amount of SGST = Net Purchase Price * % of SGST
= 85,000* 6%
= 5,100/-

Invoice Value = Net Purchase Price + CGST + SGST
= 85,000 + 5,100 + 5,100
= 95,200/-

Cash Discount = Invoice Value * % of Discount
= 95,200 * 5%
= 4,760/-

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Cash discount always availed at the time of payment and trade discount is availed at the time of dealing/trading/ Negotiation. So, in this question, we can avail cash discount when payment is made within a specific time limit.

In the Books of M/s Vaish Trader, Delhi

Date	Particulars		L.F.	Debit	Credit
	Purchase A/c	Dr.		85,000
	CGST Input A/c	Dr.		5,100
	SGST Input A/c	Dr.		5,100
	To Luxor Pens Ltd. A/c				95,200
	(Being goods purchased from M/s Luxor Pens Ltd. )

	M/s Luxor Pens Ltd A/c	Dr.		95,200
	To Cash A/c				90,440
	To Discount Received A/c				4,760
	(Being payment made to M/s Luxor Pens Ltd. and receive discount)

Explanation of All Transactions with images: –

This is not a part of the solution, So you don’t have to write it in the exam. So, why we explained if it is not needed. Because This explanation will help you to understand all transactions with logic and you don’t need to remember all the transactions but just understand and remember the logic use behind it.

Transaction No. 1

Name of Account	Type of Account	Rule which will Applicable	What happen in the transaction	Rule applied	According to Rule It will be
Purchase (Goods)	Assets	Real Account	Goods received by business	Goods comes in	Debit
CGST Input A/c	Expenses	Nominal Account	Tax collected from buyer	All Expenses and losses	Debit
SGST Input A/c	Expenses	Nominal Account	Tax collected from buyer	All Expenses and losses	Debit
M/s Luxor Pens Ltd.	A/Person	Personal Account	Goods given	They are Giver	Credit

Transaction No. 2

Name of Account	Type of Account	Rule which will Applicable	What happen in the transaction	Rule applied	According to Rule It will be
Luxor Pens Ltd.	A/Person	Personal Account	Receiving payment	They are Receiver	Debit
Cash	Assets	Real Account	Payment made in cash	Cash goes out	Credit
Discount Received	gain	Nominal Account	Discount received	All income and gains	Credit