Answer to Question #219108 in Accounting for chopra

Question

A debtor, Mr A Naidoo, owed Peter Stores R4 000 on 1 May 20.20. On 15 May Mr A Naidoo decides to settle his account at Peter Stores, by paying his account in full. Wilton Stores gives him 10% discount.

Which of the following correctly represents the above transaction (Ignore any VAT implications)?

Answer 1

The above transaction should be correctly represented as:

Credit the trade receivables control account with R4 000,

debit the settlement discount granted account with R400,

debit the bank account with R3 600.