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Sir when we are calculating sales a balancing figure from receivables account. We often add the closing figure cash reveived irrec debts and dis allowed and su tract opening figure for sales. But shouldnt sales be then the gross amount of sale minus dis allowed since we have to net off, shouldnt the value of sales go down as we gave a discount.. Can u pls expalin this to me.
If it is a trade discount the we do credit receivables and debit sales.
However when it is a cash discount (for paying on time) then it does not affect the sales. Instead the discounts allowed are shown as an expense in the Statement of profit or loss.
We credit receivables and debit discounts allowed.(I do explain this in my free lectures on control accounts).
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