Chapter 4 - double entry (not done)

Question 1

Three rules of the double-entry system (double-entry rules)

Answer 1

-Every business transaction affects at least two accounts,
-at least one account is debited and at least one is credited,
-The total amount debited must be the same as the total amount credited.

Question 2

Definition of trade discount

Answer 2

Trade Discount is a reduction to the list price

Question 3

Purpose of trade discount

Answer 3

The purpose of trade discount is to encourage customers to buy in bulk , and to get their patronage and loyalty

Question 4

Purpose of cash discount

Answer 4

while for cash discount it is to encourage credit customers to pay early within a specified time

Question 5

Definition of cash discount

Answer 5

Cash Discount is a reduction to the invoiced price

Question 6

Difference between discount allowed and discount received

Answer 6

Discount allowed is given to credit customers for their prompt payment Discount received is received from credit suppliers for our prompt payment.

Question 7

JE to record discount allowed to trade receivables

Answer 7

Dr Discount Allowed
Cr Trade Receivable

Question 8

JE to record cheque received from trade receivables (after discount)

Answer 8

Dr Cash at Bank
Cr Trade Receivable

Question 9

JE to record discount received from trade payables

Answer 9

Dr Trade payable
Cr Discount received

Question 10

JE to record cheque paid to trade payables (after discount)

Answer 10

Dr Trade Payable
Cr Cash at bank