Which of the following entries is correct in respect of reserve for discounts on accounts payable?
Correct answer: C. Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
- A. Debit P&L A/c and Credit Reserve for Discount on Accounts Payable A/c
- B. Debit Accounts Payable A/c and Credit P&L A/c
- C. Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
- D. Debit Reserve for Discount on Accounts Payable A/c and credit Accounts Payable A/c
Explanation
Expected discount on accounts payable is an anticipated gain, so the reserve is debited and Profit and Loss Account is credited. This recognises the expected reduction in the amount payable without directly reducing the creditor yet.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
Practise Accounting Principles
351 free Accounting Principles MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Accounting Principles questions
Sundry debtors as per Trial Balance is 43,000 which includes 2,200 due from ‗H in respect of goods sent to him on approval basis, the cost price of which is 1,800. Rectification would involve:
Goods in stock worth 800 are destroyed by fire and the Insurance Co. is accepted the claim for 600. Adjustment would involve
Gross Profit is equal to_________?
Bad debts recovered is:
A club paid subscription fees of `1,400. Out of which ` 200 is prepaid. In such case
Which of the following form of business organization is least regulated?