• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

Cash dicounts

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Cash dicounts

  • This topic has 5 replies, 2 voices, and was last updated 11 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • July 1, 2014 at 10:26 pm #177994
    nicedude000
    Participant
    • Topics: 11
    • Replies: 18
    • ☆

    I believe the double entry for an early payment discount is, Dr creditor Cr other income (discount), but i recently watched a video on youtue in which they were explaining the entry as Dr Creditor Cr inventory and they gave the logic that this way inventory is stated at its true purchased cost. can you please explain the right treatment also explaining the logic. thanks !

    July 2, 2014 at 8:38 am #178007
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    For Paper F3, the entry is as you have stated – Dr Payables; Cr Discount received.
    The logic being that by paying early (in order to get the discount) we are losing interest that we could otherwise have earned on the cash – i.e. it is more related to financial costs and benefits.

    With regard to the closing inventory, then this should be valued net of all discounts (but this is not relevant for Paper F3).

    In practice, because of computers, there is likely to be perpetual inventory recording and therefore there is an argument for doing what you say is in the video.
    However, for Paper F3, we always effectively assume manual accounting in which case inventory is only dealt with at the end of the period (and discounts received during the period are dealt with as per my first line).

    July 2, 2014 at 11:31 am #178023
    nicedude000
    Participant
    • Topics: 11
    • Replies: 18
    • ☆

    Thanks for the explanation. Actually i am not going to take f3, in fact, i have passed my p2 as well. I am asking this because i have to apply it in real life. we have perpetual inventory system and for cash discounts ,should i just cr the inventory or should i go for an other income account?

    July 2, 2014 at 2:04 pm #178036
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I think that I would credit inventory if it is perpetual recording, but to be perfectly honest I am not sure what would be correct.
    Obviously for F3 it is irrelevant for me, and in practice nobody ever offers my company a cash discount and so I have never had to deal with it 🙂

    It might be an idea to ask the P2 tutor what he thinks.

    July 2, 2014 at 2:56 pm #178042
    nicedude000
    Participant
    • Topics: 11
    • Replies: 18
    • ☆

    thank you

    July 2, 2014 at 3:59 pm #178048
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 6 posts - 1 through 6 (of 6 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • mrjonbain on ACCA BT Chapter 6 – Some legal obligations – Questions
  • Ken Garrett on ACCA BT Chapter 6 – Some legal obligations – Questions
  • Ken Garrett on The nature and structure of organisations – ACCA Paper BT
  • OmarAlbeity on ACCA BT Chapter 6 – Some legal obligations – Questions
  • Salimbek909 on The nature and structure of organisations – ACCA Paper BT

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in