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Which of the following items will affect the gross profit of a business?
(1) Early settlement discount allowed
(2) Early settlement discount received(A) 1 only
(B) 2 only
(C) 1 and 2
(D) None of themSir can you please explain why answer is A.
Neither does.
Gross profit = sales less cost of goods sold.
However, sales should be measured by the expected revenue to be received and if customers are expected to take the discount, the sales figure should be after deducting the discount.
Discounts received are treated as revenue after gross profit.
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