Principles of Accounting: Discount Received entries simple example - Free ZIMSEC & Cambridge Revision Notes

Principles of Accounting: Discount Received entries simple example- Updated 2024

View Larger Image

ZIMSEC O Level Principles of Accounts 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 Principles of Accounts Notes.

By garikaib|2022-09-15T12:33:31+02:00January 24th, 2023|Notes, Ordinary Level Notes, Principles of Accounts Notes|Comments Off

About the Author: garikaib

He holds an Honours in Accountancy degree from the University of Zimbabwe. He is passionate about technology and its practical application in today's world.