CIE Accounting Paper-1: Specimen Questions 152 - 154 of 214

Question number: 152

Short Answer Question▾

Write in Short

Next limited ordered 300 printing components from Jainson. The price of each component was $12.40. Jainson allowed a trade discount of 5%.

Calculate the total of the invoice Next limited received.

Explanation

$3534

Total components ordered by Next limited = 300

The cost of each component is = $12.40

The total values of printing component are = 300×12.40

3720

Trade discount is =3720×5100=186

The invoice amount is TotalvalueofassetsTradediscount3720186

$3534

Question number: 153

MCQ▾

Question

Anwar sells goods with a list price of $6000 on cash to John. Anwar offers the following discounts.

Cash discount 20%

Trade discount 10%

Choices

Choice (4) Response
a.

$6000

b.

$5400

c.

$5000

d.

$4800

Answer

b.

Explanation

Cash discount is allowed on the purchase of goods. Trade credit is allowed when payment is made with in the specified period of time. Cash discount is allowed in order to encourage the customers to pay amount before expiry of the credit period.

Question number: 154

Short Answer Question▾

Write in Short

Differentiate between cash discount and trade discount.

Distinguish between cash discount and trade discount

finding cash discount and trade discount

Cash discount

Trade discount

(i)

(i)

(ii)

(ii)

(iii)

(iii)

Explanation

calculating between cash discount and trade discount

finding cash discount and trade discount

Cash discount

Trade discount

(ii) The amount of payment is considered in cash discount.

(iii) The quantity of goods purchased is considered in trade discount.

(iv) Accounting treatment will be provided by both the vendor and buyer’s day book.

(iv) No accounting treatment

(v) The deduction of cash discount is not shown in the invoice.

(iv) The deduction of cash discount is shown in the invoice.

Cash discount is given to the customer when the payment is made to the trader. The trade discount will be provided for the prompt payment of the customer who purchased the goods from the trader on credit.

Share