Bookkeeping 13. Discounts

Question 1

1. As a CUSTOMER or as a VENDOR, you will see what kinds of discounts when you buy or sell something?

Answer 1

As a customer: DISCOUNTS

As a vendor: TRADE DISCOUNTS.

Question 2

2. If you made a cash sale of $100 dress at 40% off list, you would record it as:

Answer 2

a $60 sale in the SALES JOURNAL, ignoring the discounted amount.

Question 3

3. If you sold a $500 HVAC unit to an OPEN ACCOUNT (a CHARGE customer) at a 10% discount, you would record the transaction as:

Answer 3

a sale in the SALES JOURNAL (and subsequently in the LEDGER ACCOUNTS) at $450.

Question 4

4. If you BOUGHT the HVAC from a vendor at 40% off the list price of $500, you would record the transaction at:

Answer 4

$300 ( $500 less (500 x 40%)). YOU WOULD NOT RECORD THE TRADE DISCOUNT.

Question 5

5. The terms under which a firm sells to its OPEN ACCOUNT (charge) CUSTOMERS are known as:

Answer 5

TERMS OF SALE, CREDIT TERMS.

They are often n/30, meaning that the account must be paid within 30 days after the sale.

Question 6

6. What is 2/10, n/30?

Answer 6

A 2% discount will be given if the account is paid in full within 10 days of the sale, and it is still due in 30 days if you do not pay early.

Question 7

7. What is the SUNDRY ACCOUNT column on a SPECIAL JOURNAL (such as the CASH RECEIPTS JOURNAL)?

Answer 7

Sometimes you have a transaction for which no column exists in the journal, such as INTEREST INCOME (if you do not receive Interest Income on a regular basis). You enter this in the SUNDRY COLUMN.

Question 8

8. Transactions entered in the SUNDRY COLUMN are subsequently posted:

Answer 8

line by line to the appropriate LEDGER ACCOUNTS. the TOTAL of the SUNDRY COLUMN is NOT POSTED.