CHAPTER 4 double - entry recording Flashcards
define the double-entry system
double entry system is used to record business transactions so that everyone can understand
state how each account is placed under the ledger account
assets = + -
liabilities = - +
income = - +
capital = - +
expense = + -
drawings = + -
define cash discount
cash discount is a reduction in the amount owed
what is the purpose of cash discount
cash discount is given to encourage credit customer to pay earlier within a period of time
define discount allowed
discount allowed is a cash discount given to credit customer to pay early
state the account of discount allowed and its effect on profit
discount allowed = expenses +
it decreases the profit
define discount received
discount received is a cash discount received from a credit supplier when the business pays early
state which account discount received belongs to and its effect on profit
discount receive = income +
profit increases
define trade discount
trade discount is the reduction to the price list
when is trade discount given
trade discount is given at the point of purchase/sale of goods
what is the purpose of trade discount
trade discount is given to encourage customer to buy goods in bulk and stay loyal
how to calculate trade discount
trade discount = list price - trade discount
how to calculate cash discount
payment amount = invoiced amount - cash discount
