On 1 April,Pro Supplies received a cheque from Carter Services for payment of an invoice dated 24 March for $1 800 with credit terms of 2/10 n/30.Assuming the payment includes 10% GST,how would this transaction be recorded in Pro's cash receipts journal?

Question

Quizplus · Accepted Answer

Since the payment includes 10% GST, the amount paid excluding GST will be $1 636 ($1 800/110*100). As the credit terms are 2/10 n/30, Pro Supplies can offer a 2% discount if the payment is made within 10 days.

Therefore, the amount eligible for the discount will be $1 636*2% = $33.

The entry would be:

Debit Cash: $1 764 
Debit Sales discount: $33 
Debit GST clearing account: $3 
Credit Accounts receivable - Carter Services: $1 800

On 1 April,Pro Supplies Received a Cheque from Carter Services