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)?

A. Credit the trade receivables control account with R4 000 and debit the settlement discount granted account with R400 and debit the bank account with R3 600.

B. Credit trade receivables control account with R3 600 and debit bank account with R3 600 and debit the settlement discount granted account with R400.

C. Credit the trade receivables control account with R4 000 and debit the settlement discount granted account with R4 000.

D. Debit the trade receivables control account with R4 000 and credit the settlement discount granted account with R4 000.

E. Debit the trade receivables control account with R3 600 and credit the settlement discount granted account with R3 600.

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.

So, the correct answer is A.