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.
Quick NetOne, Telecel, Africom, And Econet Airtime Recharge
If anything goes wrong, click here to enter your query.
