Question

On April 28th, Muggle Company sells goods to Potter Company for $10,000 with terms of 2/10, net 30. On May 5th, Muggle receives cash payments from Potter. Which of the following will appear in Muggle Company’s journal entry under the gross method on May 5th?

Answer 1

	Muggle Company
	General ,Journal
Date	Particular	Amount (Dr)	Amount (Cr)
28th April	Accounts Receivable-Potter Company	$    10,000.00
	To Sales		$ 10,000.00
	(Being amt of sales to Potter Company on term 2/10,net 30)
5th May	Cash A/c=($10000*98%)	$       9,800.00
	Sales Discount A/c=($10000*2%)	$          200.00
	To Accounts Receivable-Potter company		$ 10,000.00
Note:	2/10 ,n/30 Means
	2 shows the discount percentage.
	10 shows that discount will be allowed only when the customer paid the amt within
	10 days from the date of invoice.
	n/30 means that the buyer does not paid the amount within 10 days to avail discount,then
	the net amount is due within 30 days after the sales invoice date.
	In that case Potter Company paid the amount on 5th May , it means within 10 days from the date of sales i.e 28th April
	to avail discount of 2%.