Theory question 105
Books of Original EntryThe following transactions were extracted from the books of Adamu, a sole trader for the month of March 2016.
March 4: Sold 80 bags of maize on credit to Papuk at GH¢255 per bag subject to a trade discount of 5%.
March 10: Sold goods on credit to Abass for GH¢1,170.
March 15: Received a cheque from Papuk for the amount due less a discount of 10%.
March 20: Received cash of GH¢900 from Abass.
You are required to prepare: (a) Sales Journal; (b) Customers' Accounts in the Sales Ledger; (c) Sales Ledger Control Account.
Show the model answer
(a) Sales Journal (GH¢): Mar 4 Papuk – 80 bags × 255 = 20,400 less 5% trade discount 1,020 = 19,380; Mar 10 Abass 1,170. Total credit sales 20,550 (posted to sales account).
(b) Papuk: Dr Mar 4 sales 19,380 | Cr Mar 15 bank 17,442; discount allowed (10% × 19,380) 1,938 – nil balance.
Abass: Dr Mar 10 sales 1,170 | Cr Mar 20 cash 900; Mar 31 balance c/d 270.
(c) Sales Ledger Control Account: Dr sales 20,550 | Cr bank 17,442; cash 900; discount allowed 1,938; balance c/d 270 = 20,550.
Trade discount is deducted before entry; only the cash discount is recorded as discount allowed.