Bansal Traders allow a trade discount of 10% on the list price of the goods purchased from them. Mohan Traders

Numerical Questions · Q8

Bansal Traders allow a trade discount of 10% on the list price of the goods purchased from them. Mohan Traders, who runs a retail shop made the following purchases from Bansal Traders.

Date	Amount (₹)
Dec. 21, 2016	1,000
Dec. 26, 2016	1,200
Dec. 18, 2016	2,000
Dec. 31, 2016	5,000

For all the purchases Mohan Traders drew promissory note in favour of Bansal Traders payable after 30 days. The promissory note for the sale of Dec. 21, 2016 was retained by Bansal Traders with them till the date of its maturity. The promissory note drawn on 26.12.2016 was discounted by Bansal Traders from their bank at 12% p.a. The promissory note drawn on Dec. 28, 2016 was endorsed by Bansal Traders in favour of their creditor Dream Soaps in full settlement of a purchase amounting to ₹1,900. On 25.1.2017 Bansal Traders sent the promissory note drawn on Dec. 31, 2016 to their bank for collection. All the promissory notes were met by Mohan Traders. Record the necessary journal entries for the above transactions in the books of Bansal Traders and Mohan Traders and prepare Mohan Traders account in the books of Bansal Traders and Bansal Traders account in the books of Mohan Traders.

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Trade discount 10% is deducted at source (never journalised). Net notes: Dec-21 ₹900, Dec-26 ₹1,080, Dec-18 ₹1,800, Dec-31 ₹4,500 (total ₹8,280). Maturities (30 days + 3 grace): Dec-21→23 Jan 2017, Dec-26→28 Jan 2017, Dec-18→20 Jan 2017, Dec-31→02 Feb 2017. Discounting the ₹1,080 note @12% for ~1 month = ₹1,080×12%×1/12 = ₹10.80 ≈ ₹11 (Bank ₹1,069). The ₹1,800 note endorsed to Dream Soaps settles a ₹1,900 debt, giving ₹100 discount received. Both personal accounts net to ₹8,280.

Note on the stem: the purchase list contains no Dec-28 entry; the note 'drawn on Dec. 28, 2016' is the Dec-18 promissory note (list ₹2,000, net ₹1,800). It is endorsed to Dream Soaps in full settlement of a ₹1,900 debt, so ₹100 discount is received. Trade discount is never entered in the books; all figures below are net of the 10% trade discount.

Books of Bansal Traders

Date	Particulars	Debit (₹)	Credit (₹)
2016 Dec 18	Mohan Traders A/c Dr.	1,800
	To Sales A/c		1,800
	(Sold goods ₹2,000 less 10% trade discount)
2016 Dec 18	Bills Receivable A/c Dr.	1,800
	To Mohan Traders A/c		1,800
2016 Dec 18	Dream Soaps A/c Dr.	1,900
	To Bills Receivable A/c		1,800
	To Discount Received A/c		100
	(Note endorsed to Dream Soaps in full settlement of ₹1,900)
2016 Dec 21	Mohan Traders A/c Dr.	900
	To Sales A/c		900
	(Sold goods ₹1,000 less 10% trade discount)
2016 Dec 21	Bills Receivable A/c Dr.	900
	To Mohan Traders A/c		900
2016 Dec 26	Mohan Traders A/c Dr.	1,080
	To Sales A/c		1,080
	(Sold goods ₹1,200 less 10% trade discount)
2016 Dec 26	Bills Receivable A/c Dr.	1,080
	To Mohan Traders A/c		1,080
2016 Dec 26	Bank A/c Dr.	1,069
	Discount A/c Dr.	11
	To Bills Receivable A/c		1,080
	(Note discounted @12% p.a.; ₹1,080×12%×1/12 = ₹10.80, rounded to ₹11)
2016 Dec 31	Mohan Traders A/c Dr.	4,500
	To Sales A/c		4,500
	(Sold goods ₹5,000 less 10% trade discount)
2016 Dec 31	Bills Receivable A/c Dr.	4,500
	To Mohan Traders A/c		4,500
2017 Jan 23	Cash/Bank A/c Dr.	900
	To Bills Receivable A/c		900
	(Dec-21 note met on maturity)
2017 Jan 25	Bills Sent for Collection A/c Dr.	4,500
	To Bills Receivable A/c		4,500
	(Dec-31 note sent to bank for collection)
2017 Feb 02	Bank A/c Dr.	4,500
	To Bills Sent for Collection A/c		4,500
	(Dec-31 note collected by the bank on maturity)

Books of Mohan Traders

Date	Particulars	Debit (₹)	Credit (₹)
2016 Dec 18	Purchases A/c Dr.	1,800
	To Bansal Traders A/c		1,800
2016 Dec 18	Bansal Traders A/c Dr.	1,800
	To Bills Payable A/c		1,800
2016 Dec 21	Purchases A/c Dr.	900
	To Bansal Traders A/c		900
2016 Dec 21	Bansal Traders A/c Dr.	900
	To Bills Payable A/c		900
2016 Dec 26	Purchases A/c Dr.	1,080
	To Bansal Traders A/c		1,080
2016 Dec 26	Bansal Traders A/c Dr.	1,080
	To Bills Payable A/c		1,080
2016 Dec 31	Purchases A/c Dr.	4,500
	To Bansal Traders A/c		4,500
2016 Dec 31	Bansal Traders A/c Dr.	4,500
	To Bills Payable A/c		4,500
2017 Jan 20	Bills Payable A/c Dr.	1,800
	To Bank A/c		1,800
	(Dec-18 note met on maturity)
2017 Jan 23	Bills Payable A/c Dr.	900
	To Bank A/c		900
	(Dec-21 note met on maturity)
2017 Jan 28	Bills Payable A/c Dr.	1,080

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