1. **State the problem:** Anita and Sunil have transactions with trade discounts and cash discounts. We need to prepare journal entries in Anita's books for three special events on 20 June, 25 June, and 28 June. 2. **Calculate trade discounts:** All invoices and returns have a 10% trade discount. - Anita sold goods to Sunil on 3 June: List price = 1200 Trade discount = 10% of 1200 = 120 Net amount = 1200 - 120 = 1080 - Sunil sold goods to Anita on 8 June: List price = 860 Trade discount = 10% of 860 = 86 Net amount = 860 - 86 = 774 - Sunil returned goods to Anita on 12 June: List price = 150 Trade discount = 10% of 150 = 15 Net amount = 150 - 15 = 135 (return reduces amount payable) - Anita returned goods to Sunil on 15 June: List price = 100 Trade discount = 10% of 100 = 10 Net amount = 100 - 10 = 90 (return reduces amount receivable) 3. **Calculate balances before set-off on 20 June:** - Anita's receivable from Sunil: Sales to Sunil = 1080 Less returns from Sunil = 90 Net receivable = 1080 - 90 = 990 - Anita's payable to Sunil: Purchases from Sunil = 774 Less returns to Sunil = 135 Net payable = 774 - 135 = 639 4. **Set-off balance on 20 June:** - Net balance = 990 (receivable) - 639 (payable) = 351 (Sunil owes Anita) 5. **Cash discount on early payment:** 2% of 351 = 7.02, rounded to 7 - Amount paid by Sunil = 351 - 7 = 344 6. **Journal entries on 20 June:** - Debit Sunil's account by full receivable 990 - Credit purchases (Sunil) 639 - Credit cash discount allowed 7 - Debit bank/cash 344 Journal entries: $$\text{Dr Sunil} \quad 990$$ $$\text{Cr Purchases} \quad 639$$ $$\text{Cr Cash Discount Allowed} \quad 7$$ $$\text{Cr Bank} \quad 344$$ 7. **Dishonour of cheque on 25 June:** - Reverse receipt and discount allowed: $$\text{Dr Bank} \quad \cancel{344}$$ $$\text{Cr Sunil} \quad \cancel{344}$$ $$\text{Dr Cash Discount Allowed} \quad \cancel{7}$$ $$\text{Cr Sunil} \quad \cancel{7}$$ - Record bank charges $12 paid by Anita: $$\text{Dr Bank Charges} \quad 12$$ $$\text{Cr Bank} \quad 12$$ 8. **Irrecoverable debt write-off on 28 June:** - Write off $40 from Sunil's account: $$\text{Dr Bad Debts} \quad 40$$ $$\text{Cr Sunil} \quad 40$$ 9. **Summary of journal entries:** - 20 June: $$\text{Dr Sunil} \quad 990$$ $$\text{Cr Purchases} \quad 639$$ $$\text{Cr Cash Discount Allowed} \quad 7$$ $$\text{Cr Bank} \quad 344$$ - 25 June: $$\text{Dr Bank} \quad 344$$ $$\text{Cr Sunil} \quad 344$$ $$\text{Dr Cash Discount Allowed} \quad 7$$ $$\text{Cr Sunil} \quad 7$$ $$\text{Dr Bank Charges} \quad 12$$ $$\text{Cr Bank} \quad 12$$ - 28 June: $$\text{Dr Bad Debts} \quad 40$$ $$\text{Cr Sunil} \quad 40$$