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18 Accountancy

1.5.13 Discount
Discount is the deduction in the price of the goods sold. It is offered in two ways.
Offering deduction of agreed percentage of list price at the time selling goods is
one way of giving discount. Such discount is called ‘trade discount’. It is generally
offered by manufactures to wholesellers and by wholesellers to retailers. After
selling the goods on credit basis the debtors may be given certain deduction in
amount due in case if they pay the amount within the stipulated period or earlier.
This deduction is given at the time of payment on the amount payable. Hence, it
is called as cash discount. Cash discount acts as an incentive that encourages
prompt payment by the debtors.

1.5.14 Voucher
The documentary evidence in support of a transaction is known as voucher. For
example, if we buy goods for cash, we get cash memo, if we buy on credit, we get
an invoice; when we make a payment we get a receipt and so on.

1.5.15 Goods

It refers to the products in which the business unit is dealing, i.e. in terms of
which it is buying and selling or producting and selling. The items that are
purchased for use in the business are not called goods. For example, for a
furniture dealer purchase of chairs and tables is termed as goods, while for
other it is furniture and is treated as an asset. Similarly, for a stationery merchant,
stationery is goods, whereas for others it is an item of expense (not purchases)

1.5.16 Drawings
Withdrawal of money and/or goods by the owner from the business for personal
use is known as drawings. Drawings reduces the investment of the owners.

1.5.17 Purchases
Purchases are total amount of goods procured by a business on credit and on
cash, for use or sale. In a trading concern, purchases are made of merchandise
for resale with or without processing. In a manufacturing concern, raw materials
are purchased, processed further into finished goods and then sold. Purchases
may be cash purchases or credit purchases.

1.5.18 Stock
Stock (inventory) is a measure of something on hand-goods, spares and other
items in a business. It is called Stock in hand. In a trading concern, the stock on
hand is the amount of goods which are lying unsold as at the end of an accounting

2018-19