Jane sold goods to Johnno for $4400 including GST. Johnno paid his account within the discount period and received a settlement discount of 5%. Using the gross method, which of the following is the correct entry in Jane's books to record Johnno's payment?

Question

Quizplus · Accepted Answer

The correct entry is to debit Cash for $4180, debit Discount allowed for $200, debit GST payable for $20, and credit Accounts receivable for $4400. This is because the gross method records the discount as a reduction in revenue, rather than as a reduction in the amount owed by the customer.

Jane Sold Goods to Johnno for $4400 Including GST