If discounts are given for early payment, _______.
A)sales discounts are recorded when recording the cash receipt and reducing a customer's receivable
B)the customer's account payable balance should be decreased accordingly
C)the company should credit the Sales Discount account
D)an increase in equity will result from a customer taking the discount

Question

Quizplus · Accepted Answer

When discounts are given for early payment, the sales discounts should be recorded when recording the cash receipt and reducing a customer's receivable. This means that the customer's account receivable balance is decreased, and there should be a credit to the Sales Discount account. Option B is incorrect because it mentions the customer's account payable, which is not relevant to this scenario. Option D is incorrect because taking a discount does not result in an increase in equity, rather it results in a decrease in the amount owed by the customer.

If Discounts Are Given for Early Payment, _______