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Hi My Dear Tutor, I have a question.
Cash discount of 150$ on paying a supplier,JW, had been taken, even though the payment was made outside the time limit.
AS we talk about discount paying to supplier it should be DISCOUNT RECEIVED
DID.
1) Debit trade payable-150
credit discount-1502) should be
Debit discount received -150
credit trade payable1503)correction
debit discount received-300
credit trade payable-300why the correct answer shows 2)?this is because the double entry has not been made yet that is why 2) is correct?3 was correct when it would mention such as accounting entries made?DId i understand correctly?
When the company made the payment, they took a discount of 150 (and paid less than the invoice) and so they will have debited payables and credited discount received.
That would have all been correct if they had been entitled to the discount.However, since they should not have taken the discount, they should not have made that entry (and they still owe the remaining 150).
So the entry needs cancelling/removing. To cancel it we credit payables (so now they still owe the remaining 150) and we debit discounts received (so the balance on discounts received is now zero as it should be).thanks for explaining..usually when i do these kind of question i try to explain myself while doing and this one seemed to be confusing that is why asking..
By the way open tuition helped to pass f1 f2 f3 f7 thanks for your support…
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