Q.Prepare the account of Ramesh & Co. in the ledger of Kavya Traders for the month, given: Purchased goods from Ramesh & Co. on credit, ₹9,000; Returned goods to Ramesh & Co., ₹1,000; Paid Ramesh & Co. by cheque, ₹7,500, in full settlement of the balance due.

Post the credit purchase to the credit side, the return to the debit side, and treat the shortfall between what was owed after the return and what was actually paid as Discount Received.

Ramesh & Co. A/c

Working: the credit purchase of ₹9,000 is posted (from the Purchases Book) to the CREDIT of Ramesh & Co.'s account, since the business now owes Ramesh & Co. that amount. The ₹1,000 return (from the Purchases Return Book) is posted to the DEBIT of the account, reducing the amount owed to ₹8,000 (= 9,000 − 1,000). Since ₹7,500 paid by cheque was accepted in FULL settlement of this ₹8,000 balance, the ₹500 shortfall is Discount Received (a gain to Kavya Traders), also posted to the debit of Ramesh & Co.'s account, since it too reduces/settles what was owed …

A common error is forgetting to record the Discount Received of ₹500 at all, which would leave the account showing an incorrect residual balance of ₹500 owed even though the amount was genuinely settled in full — whenever a problem says 'in full settlement …