A. Journal Entries for the Given Transactions:

1. Goods Purchased from Moon Traders:

   • Purchase amount: Rs.10,000
   • Trade discount: 10% (Rs.1,000)
   • Total cost after trade discount: Rs.9,000
   • Half of the total amount paid to Rosary traders:
     • Debit: Moon Traders (Inventory) = Rs.9,000
     • Credit: Cash/Bank = Rs.4,500
     • Credit: Rosary Traders (Accounts Payable) = Rs.4,500

2. Cash Purchase with Sales Tax:

   • Cash purchase amount: Rs.5,000
   • Sales tax rate: 4%
   • Sales tax paid: Rs.200 (4% of Rs.5,000)
     • Debit: Purchases (or Inventory) = Rs.5,000
     • Debit: Sales Tax Expense = Rs.200
     • Credit: Cash/Bank = Rs.5,200

3. Goods Returned to Moon Traders:

   • Goods returned due to inferior quality: Rs.1,000
     • Debit: Moon Traders (Inventory) = Rs.1,000
     • Credit: Purchases Returns (contra account to Purchases) = Rs.1,000

Answer:

• All credit purchases of goods are recorded in a purchase day book.
  • False: Credit purchases are recorded in the Purchase Journal (not necessarily a specific “purchase day book”).
• Trade discount is accounted in the books of accounts.
  • False: Trade discounts are not recorded in the books of accounts; they are deducted before recording the transaction.
• Discount received is disclosed in SOCI (income statement) as an expense.
  • False: Discount received is an income and is disclosed separately in the income statement.
• Purchase returns are also known as return inwards.
  • True: Purchase returns are goods returned by the buyer to the seller and are also called “return inwards.”

Answer: