Multiple choice

How will discount received be treated if it appears in the trial balance and no reserve for discount on creditors account appears?

  1. Shown on the Credit side of the Profit & Loss a/c

  2. Shown on the Credit side of the Reserve for Discount on Creditors a/c

  3. Shown on the Credit side of the Trading Account

  4. No entry at all
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A Correct answer
Explanation

Discount received is a gain or income for the business, so it appears on the credit side of the Profit & Loss account. The key phrase 'no reserve for discount on creditors account appears' means there's no separate provision account - we're only treating the discount received itself. Since it's in the trial balance, it's an actual amount received during the year.

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