Side and General Ledger Account (Discount)

by Owami
(South Africa, Cape Town)

Q:Which one of the following alternatives represents the side and general ledger account to which the total of the discount column in the cash payments journal should be posted monthly?

The payments to "creditors column" includes the amount of the actual payment as well as the discount.

1. Debit side of the settlement discount received account
2. Debit side of the creditors control account
3. Credit side of the settlement discount allowed account
4. Credit side of the settlement discount received account.
5. None of the above

A: For cash payments you can only receive a discount. So it's not discount allowed, it's discount received. Any discount received should be a credit to the discount received account (an income account). So based on the information you supplied above, sounds like 4. Credit side of the settlement discount received account.

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