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Sir if a company sells good for $80 on credit with a discount of 12.5%. what amount will be on sales book.
I got $70. after discount, but the answer is $80. Im confused as we actually receive just $70 when the customer pays, Why $80 in the sales day bookIt depends on what king of discount it is. If it is a trade discount then the customer will only pay $70 and then we do enter $70 in the sales day book (or receivables journal, which is another name for it).
If it is a settlement discount, then the customer will only pay $70 if they pay early, but will pay $80 if they do not pay early. For this reason we enter $80 in the sales day book and then if they do pay early we deal with the discount later (DR Discounts CR Receivables).
I don’t know where you found this question, but such a big discount would in fact certainly not be a settlement discount but a trade discount – in which case we would enter $70 in the sales day book.
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