FA – May 2021 – L1 – SA – Q4 – Double-Entry Accounting Principles

Identify the correct statement regarding cash discount.

Question

Which of the following is CORRECT in respect of cash discount?
A. Discount allowed is a deduction from trade payables
B. Discount received is a deduction from sales
C. Discount columns in cash book form part of the double entry
D. The total amount of discount on the debit side of cash book is an income
E. The total amount of discount on the credit side of cash book is discount received

Answer

Answer:
E. The total amount of discount on the credit side of cash book is discount received

Explanation:
The correct answer is E because in the double-entry accounting system, the cash book’s credit side reflects the discount received, which is income for the entity.

Tags: Accounting principles, Cash discount, Double Entry
Level: Level 1

Topic: Double-Entry Accounting Principles
Series: MAY 2021

Uploader: Kwame Aikins