Purchase 10000 RS. Goods trade discount 10%and cash discount 2% paid 60% immediately?

Accounts Payable                   15000Dr

                     Discount rcvd                              750Cr

                     Cash/Bank                                14250Cr

1st:  Purchase 10,000 RS.  Goods trade discount 10%

=> The purchase will be recorded at the amount AFTER the trade discount substracted at the net amount of 9,000 RS.  [10,000 x 10% = 1,000 (trade Discount)]

Periodic System                             

Entries:       Purchase   9,000 RS  (DR)                     

                        Accounts Payable   9,000 RS    (CR)

Perpetual System

Entries:       Inventory      9,000 RS  (DR)

                        Accounts Payable     9,000 RS   (CR)

2nd:  Cash Discount 2% paid 60% immediately

=>  Buyer is allowed to deduct 2% cash discount if the early payment of 60% paid immediately.

Periodic System

Entries:   Accounts Payable  (9,000 RS x 60%)   5,400  RS (DR)

                  Purchase Discount (5,400 RS x 2%)        108  RS   (CR)

                  Purchase (5,400 - 108)                       5,292  RS  (CR)

Perpetual System

Entries:   Accounts Payable  (9,000 RS x 60%)   5,400  RS (DR)

                  Cash Discount (5,400 RS x 2%)                 108  RS   (CR)

                  Inventories (5,400 - 108)                       5,292 RS  (CR)

Trade discount is not  shown separately in the books of accounts.

So the amount recorded in a purchase register should be net amount only. ie. 10,000/- minus 10% of 10,000/- = 9,000/-

Immediate payment due is 60% of 9,000/- = 5,400/-

On that 5,400/- cash disocunt 2% available = 108/-

So net cash payment will be 5,2,92/-

Entry is

Purchase  9000Dr

AP              9000Cr

                     AP                     5400Dr

                     Discount rcvd    108Cr

                     Cash/Bank      5,292Cr

Rs.5280 need to pay immediately.

Rs.1200 will deduct from the original amount(10,000) and 60% of the net amount(8800) will be paid immediately.

The purchase will be recorded as follows.

1st

Purchase               Debit            RS.    10,000.

Trade Discount       Credit          RS.      1,000. 

Payable to Vendor   Credit         RS.       9,000.

2nd Entry

Payable to Vendor     Debit     RS.         5,400.

Cash Discount          Credit    Rs.            108.

Bank                        Credit    Rs.        5,292.