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The Accounting Cycle Fiasco
11-24-2004, 12:08 AM,
#1
The Accounting Cycle Fiasco
Hi guys, my name is Farrukh Muhammad Taufiq and I'm doing my M.BA in high spirits and on the top of my game from Mohammad Ali Jinnah University. I always enjoy the company of positive critics and I also support a debate which yields knowledge for both the reader and the poster. I have been assigned a project by our subject facilitator Mr. Salman Shehzad who happens to be among the very competent in the field of accounting. I came across a intricacy this morning and would like to share with ya.

We know that a treble cash book has three columns on each side (Cash, Bank and Discount Allowed/Discount Received) We also have clear idea about how to post amounts from subsidiary books (e.g., Treble Cash Book) into their subseqent ledgers. Now, for a "Discount Received" ledger, for instance, what would we write on it's credit side?

Particulars Folio Amount
(Rs.)

By Creditors A/C C.B XXX

That's a photographic copy of our book. But I disagree with it. Why?

Because it says "Creditors" and we obtain discount on cash payments (remember discount pertains to cash discount, not any other e.g., trade discount), not on credit purchases, right? And even if we make it partial in cash and partial on credit, we would credit it with accounts like "Purchases" or with the name of the asset, if any purchased because "Discount Received" and "Creditor" would both be credited IN THE SAME DIRECTION OR WAY.

What do you think? Am I confusing you with the above multi-faceted query? I hope not. <img src=icon_smile_blackeye.gif border=0 align=middle>

Life Life in the Fast Lane!
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11-24-2004, 06:07 AM,
#2
 
Any cash discount received including volume discount has to be disregarded when accounting for cash purchases. All such purchases need to be recorded at net values.
As far as the cashbook is concerned maybe someone can throw light on its format as it's been ages I have had a look at it.
BTW .... its really an odd emphasis -'treble cash book' as part of an MBA course. Maybe some people in jorya bazar still use it. I remember we didn't spend many hours on it during our BAC.

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