Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes: Source Documents: Three Column Cash Book: Discount Received entries simple example
- We have looked at the concept of Discount Received here
- In this topic we will look at entries that can be used to record discount received
- One thing to be wary off is that different suppliers will likely have different discount rates
- Some will likely offer no discount at all
- Be careful to apply the correct discount rate to the corresponding supplier
- Below is an example exercise and solution of the entries:
Simple Discount Received Example
- The following transactions took place during the first month of A Moyo’s business:
- 1 Jan Started the business with 5000 cash
- 3 Jan deposited 4000 into the bank
- 5 Jan bought goods worth 500 on credit from R Matingo
- 7 Jan bought goods worth 1000 on credit from P Hatizivi
- 17 Jan paid the amount using cash owing to R Matingo and received a 10% discount
- 29 Jan paid the amount owing to P Hatizivi using a bank transfer and received 5% discount
- No other transactions took place during the month
Required:
- Show the double entries to be made in the Cash Book, Creditor’s Ledger/Purchases Ledger and General Ledger if the business uses a two column Cash Book
- Show the double entries to be made in the the Cash Book, Creditor’s Ledger/Purchases Ledger and General Ledger if the business uses a two column Cash Book
NB Do not show the Profit and Loss Account. We are also assuming that A Moyo’s accounting/trading period is one month long
1) Solution when using the two column Cash Book
| Purchases(Creditor's) Ledger | ||||||||
| DR | R Matingo Account | CR | ||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 17 Jan | Cash | 450 | 1 Jan | Purchases | 500 | |||
| 17 Jan | Discount | 50 | ||||||
500 | 500 | |||||||
| P Hatizivi Account | ||||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 29 Jan | Bank | 950 | 7 Jan | Purchases | 1000 | |||
| 29 Jan | Discount | 50 | ||||||
1000 | 1000 | |||||||
| Cash Book | ||||||||
| DR | CR | |||||||
| Date | Details | Cash($) | Bank($) | Date | Details | Cash($) | Bank($) | |
| 1 Jan | Capital | 5000 | 3 Jan | Bank | 4000 | |||
| 3 Jan | Cash | 4000 | 17 Jan | R Matingo | 450 | |||
| 29 Jan | P Hatizivi | 950 | ||||||
| 31 Jan | Balance c/d | 550 | 3050 | |||||
5000 | 4000 | 5000 | 4000 |
|||||
| General Ledger | ||||||||
| Discount Received Account | ||||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||
| 31 Jan | Profit and Loss | 100 | 17 Jan | R Matingo | 50 | |||
| 29 Jan | P Hatizivi | 50 | ||||||
100 | 100 | |||||||
2) Solution when using a three column Cash Book
| Purchases(Creditor's) Ledger | ||||||||||
| DR | R Matingo Account | CR | ||||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||||
| 17 Jan | Cash | 450 | 1 Jan | Purchases | 500 | |||||
| 17 Jan | Discount | 50 | ||||||||
500 | 500 | |||||||||
| P Hatizivi Account | ||||||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||||
| 29 Jan | Bank | 950 | 7 Jan | Purchases | 1000 | |||||
| 29 Jan | Discount | 50 | ||||||||
1000 | 1000 | |||||||||
| Cash Book | ||||||||||
| DR | CR | |||||||||
| Date | Details | Discount($) | Cash($) | Bank($) | Date | Details | Discount($) | Cash($) | Bank($) | |
| 1 Jan | Capital | 5000 | 3 Jan | Bank | 4000 | |||||
| 3 Jan | Cash | 4000 | 17 Jan | R Matingo | 50 | 450 | ||||
| 29 Jan | P Hatizivi | 50 | 950 | |||||||
| 31 Jan | Balance c/d | 550 | 3050 | |||||||
--- | 5000 | 4000 | 100 | 5000 | 4000 |
|||||
| General Ledger | ||||||||||
| Discount Received Account | ||||||||||
| Date | Details | Amount($) | Date | Details | Amount($) | |||||
| 31 Jan | Profit and Loss | 100 | 31 Jan | Total for the month | 100 | |||||
- This is a simple example showing only Discount Received
- In real life Discount Allowed is involved as well
- To see entries involving both Discount Received and Discount Allowed click here
To access more topics go to the Cambridge IGCSE Accounting(0452)/O Level Principles of Accounts(7110) Notes.
