Discount
A discount is a concession in the selling price of a product offered by a seller to its customers. According to nature, there are two types of discount:
A. Discount Allowed
B. Discount Received
A. Discount Allowed: When at the time of sales or receiving cash, any concession is given to the customers, it is called discount allowed.
Journal Entry:
B. Discount Received: When at the time of purchase or paying cash, any concession is received from the seller, it is called discount received.
Journal Entry:
According to the business point of view, there are two types of Discount:
A. Trade Discount
B. Cash Discount
A. Trade Discount: The discount provided by the seller to its customers at a fixed percentage on the listed price mostly on bulk purchases is called a trade discount. Trade discount is not shown separately in the journal entry.
Journal Entry:
B. Cash Discount: A Cash discount is offered to those customers who make quick payments or payment is made by them within a fixed period.
Journal Entry:
Journal Entries
A Journal is a book in which all the transactions of a business are recorded for the first time. The process of recording transactions in the journal is called Journalising and recorded transactions are called Journal Entries.
Every transaction affects two accounts, one is debited and the other one is credited. ‘Debit’ (Dr.) and ‘Credit’ (Cr,) are the two terms or signs used to denote the financial effect of any transaction. The word ‘journal’ has been derived from the French word ‘JOUR’ meaning daily records. Journal Book is maintained to have prime records for small firms. After preparing the journal book, the transactions are then posted to Ledger.
Steps to be followed to record business transactions in a journal are:
- Ascertain the accounts related to a particular transaction.
- Find the nature of the related account.
- Ascertain the rule of debit and credit, applicable to the related account.
- Record the date of the transaction in the ‘Date Column’.
- Write the name of the account to be debited in the particulars column along with the abbreviation ‘Dr.’ and the amount to be debited in the debit amount column.
- Write the name of the account to be credited in the next line starting with ‘To’ and the amount to be credited in the credit amount column.
- Write a brief explanation of the transaction as narration.
- Draw a line across the entire particulars column to separate one journal entry from the other.
Table of Content
- Capital Account
- Drawings Account
- Expenses Paid
- Income Received
- Goods
- Transactions
- Assets
- Depreciation
- Discount
- Amount Paid or Received in Full/Final Settlement
- Compound or Composite Journal Entry
- Opening Journal Entry
- Bad Debts
- Banking Transactions
- Bad Debts Recovered
- Loss of Insured Goods/Assets
- Loan Taken
- Loan Given
- Outstanding Expenses
- Prepaid or Unexpired or Advance Expenses
- Income Due or Accrued Income
- Income Received in Advance or Unearned Income
- Income Tax
- Life Insurance Premium
- Employee’s Life Insurance Premium
- Interest on Capital
- Interest on Drawings
- Use of Goods in Business
- Expenditure on Assets (Erection or Installation)
- Expenses on Purchase of Goods
- Outstanding Salary
- Prepaid Insurance
- Commission Received
- Cash Sales
- Provisions
- Rent Paid
- Salaries Paid
- Deferred Revenue