- This topic has 1 reply, 2 voices, and was last updated 3 years ago by
.
- Posts
can you help me this question, i don’t understand
Y Ltd keeps a receivables ledger control account as part of its accounting system.
The following transactions take place in March:(a) Invoices totalling $5,000 are raised to Customer X in March. These invoices offer the customer a 5% discount if they pay within 14 days. Of these invoices, Y Ltd expects invoices amounting to $2,000 to be paid with the discount taken.
(b) Customer Z pays cash of $2,850 for invoices with face values of $3,000. They took advantage of discounts totalling $150 for early payment, however Y Ltd had not expected Customer Z to take up the discounts.
Which of the following entries correctly record these transactions?
A DEBIT receivables ledger control $5,000, CREDIT sales $5,000, DEBIT cash $2,850,
CREDIT receivables ledger control $2,850B DEBIT receivables ledger control $4,900, CREDIT sales $4,900, DEBIT cash $2,850,
DEBIT sales $150, CREDIT receivables ledger control $3,000C DEBIT receivables ledger control $5,000, CREDIT sales $5,000, DEBIT cash $2,850,
DEBIT sales $150, CREDIT receivables ledger control $3,000D DEBIT receivables ledger control $4,900, CREDIT sales $4,900, DEBIT cash $2,850, CREDIT receivables ledger control $2,850
(a) They expect they will receive 3,000 + (2,000 – 5%) = $4,900.
Therefore they will Dr Receivables and Cr Sales with $4,900(b) When they made the sales they did not expect customer to take the discount, so the entry will have been Dr Receivables Cr Sales with $3,000.
When they receive the cash, the customer had taken the discount and so the entry is Dr Cash 2,850, Cr Receivables 3,000, and Dr Sales $150.
This is all explained in my free lectures on IAS15. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
- You must be logged in to reply to this topic.