Multiple choice

The cash discount allowed to a debtor should be credited to

  1. discount account

  2. customer's account

  3. sales account

  4. profit and loss account

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When cash discount is allowed to a debtor, the debtor's personal account is CREDITED to reduce the amount they owe. The discount is a concession for early payment. The discount account is debited (recording the expense), and the customer's account is credited (reducing the receivable). This is part of recording the discount transaction.