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Chapter 20
Chapter 7
Example 1
On 1 January, AB bought goods for resale on credit from XY, with a list price
of $250, subject to trade discount of 20 per cent.
Required:
What was the amount of the trade discount and what are the accounting
entries required by AB to record this purchase of goods?
Example 1: Solution
The trade discount was $50 (20% × $250), and therefore the net amount
payable is $200.
The accounting entries required by AB to record this purchase are as
follows:
Debit Purchases $200
Credit Payables $200
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