bought merchandise on account. Received a two and a half percent trade discount. The gooda were originally marked at 3200 rand (i.e.before the trade discount) which source document will be used and what will the accounting equation be??
In this scenario, the source document that would typically be used is a purchase invoice. A purchase invoice is a document provided by the seller to the buyer, indicating the details of the purchase, including the trade discount and any other relevant information.
To determine the accounting equation, we need to understand the impact of this transaction on the financial statements. Let's break down the steps:
1. Calculate the trade discount: The trade discount is two and a half percent (2.5%) of the original marked price of 3200 rand. To calculate the discount amount, you can multiply 3200 by 2.5% (or 0.025). The trade discount in this case would be 80 rand (3200 * 0.025 = 80).
2. Determine the actual purchase price: To find the actual purchase price after the trade discount, we need to subtract the trade discount amount from the original marked price. The actual purchase price in this case would be 3200 rand minus 80 rand, which equals 3120 rand.
Now, let's consider the accounting equation:
Assets = Liabilities + Equity
Assuming you are paying for the merchandise on account, the transaction would typically impact the following accounts:
- Increase in Inventory (Asset): The purchase of merchandise on account would increase the Inventory account.
- Increase in Accounts Payable (Liability): Since you are buying on account, it means you owe the seller the purchase amount. Therefore, Accounts Payable would increase.
The accounting equation after this transaction would look like this:
Assets (+Inventory) = Liabilities (+Accounts Payable) + Equity