A Multiple Choice Question

Sorry sir!

I got you a bit, but not completely.

1. Can you tell me which answer is correct?

2. What do you mean by these two:

(Is not a function of buying..)
(To keep borrowing low or pay up quickly)

3. Does the Early Settlement Discount received affect Net Profit as you said it appears after gross profit if yes why?

Ok.

I think the first option is correct cause Early Settlement Discount Allowed just reduces the amount of sale as it is not recorded. Therefore, the sale or revenue amount from which we deduct cost of sale will be reduced and so will the gross profit. So, Early Settlement Discount Allowed has an impact on gross profit. It reduces gross profit.

I got this from your answer:

for a business early settlement discount received results:

1. Reduction in interest earned on the money that the business has deposited in the bank account because the business will pay up quickly to earn settlement discount and the money in the bank will get less gradually and interest received will also reduce. In other words, the bank will pay less interest to the business for the money deposited.

2.Increasing interest paid on overdraft because business will keep on paying quickly in order to earn settlement discount, at some point in time in future, the business will be compelled to get overdraft. Their bank balance will get zero. So, they will pay interest on the overdraft taken by the business.

In conclusion, the settlement discount received reduces interest earned on deposits and increasing interest paid on overdraft and these two increase expenses and when expenses are increased, the net profit is decreased . So, settlement discount received has an impact on net profit.

Are my above points right sir???

Sorry to extend the question.

Make this last point clear for me:

Where in profit or loss does the capital income and revenue income appear?

Before gross profit?

Included in revenue?

Added to gross profit?

Or
Deducted from expenses?

Thank you so much sir!

Ok sir!

Are the following points right?

1.Net Ordinary Income =Net Profit

2. we add other income and deduct
other expenses from net profit which is also called Net Ordinary Income to arrive at Net Income Figure.

Is it the Net Ordinary Income Figure or Net Income Figure that is added to Capital in Statement of Financial Position?

As per FA2 Textbook, Net Profit (which I think is also called Net Ordinary Income) is added to Capital. Then, what shall be done with Net Income Figure?
What is the benefit of finding Net Income Figure?

I have doubt in the following :

Capital income is other income and it is added to net profit (Net Ordinary Income) and appears before net income ,but I think revenue income is different. It can appear in two different parts of statement of profit or loss.

Because Revenue income can be from

1.The sale of trading assets
(added to Revenue and so appears before gross profit)

2.Rent,interest and dividends received from non current assets held by the business. ( these are other income added to Net operating income or net profit and appear before Net income)

Please tell me if I am wrong.