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Hi John sir, how are you? John sir help me with the follwoing:
Q#1. what is the difference between factory supervisor and payroll supervisor?
Q#2 How early settlement discount is classified?Plz John sir explain
A factory supervisor is a supervisor who looks after the production.
A payroll supervisor is parts of the accounts section who helps in preparation of payroll.
Note that a supervisor is the first line of management, thus lowest in the management hierarchy.
Early Discount
Early discount is when you decide to pay within the early settlement period. when u settle ur debts early, the supplier usually gives u an extra incentive in the form of a discount.
for example, if u owe 100 and the supplier is giving an early settlement discount of 2%.
early settlement means u will pay 98.
the 2 will be recorded as Discounts Received. this account is usually called sundry income.the entry will be:
Dr Payables 98
Cr bank 98and
Dr Payables 2
Cr Discount Received 2you can also write it as:
Dr Payables 100
Cr Bank 98
Cr Discount Received 2
——————————————————-the thing to note is the Discount received is treated as sundry income
Everything Mansoor has written is correct.
I would add two things:
The cost of the factory supervisor would be classified as cost of sales (because it is production).
The cost of the payroll supervisor would be classified as an administrative cost.With regard to discounts, certainly if a supplier gives us a settlement discount, then we have a discount received and Mansoor’s entries are correct.
However, in exactly the same way, we might offer customer’s an early settlement discount. This would be an expense.(If it helps, you can find an example in our free course notes (and a lecture to go with it) in the chapter on Control Accounts)
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