CA Inter P4 · Chapter 2 · Question 11 of 12
Material with a list price of ₹2,00,000 is bought at a trade discount of 10%. GST at 18% is charged on the invoice and full input tax credit is available. Freight inward is ₹5,000 and a cash discount of 2% is received for prompt payment. Following the principles of CAS-6, the cost of material purchased is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) ₹1,85,000
Explanation
Purchase price net of trade discount = ₹2,00,000 - 10% = ₹1,80,000 (CAS-6: trade discounts and rebates are deducted). GST is excluded because input tax credit is available. Freight inward is added: ₹1,80,000 + ₹5,000 = ₹1,85,000. Cash discount is not deducted from the purchase cost under CAS-6 as explained in the ICAI Study Material; it is treated as a finance item, so deducting 2% (₹3,600) to get ₹1,81,400 is wrong. Including GST would give ₹2,17,400.
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