PRC-1 · Chapter 2 · Question 92 of 100
Why are trade discounts completely omitted from the formal double-entry accounting records (including ledgers)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Because the 'sale' formally takes place at the mutually agreed lower net price, making the list price irrelevant for accounting purposes.
Explanation
A trade discount determines the actual finalized price of the transaction before the exchange happens. Accounting records facts based on the final agreed value, ignoring theoretical catalog prices.
More Books of Prime Entry MCQs
- Q94If a cheque payment to a supplier is recorded correctly in the cash book, but the supplier later informs the business they destroyed the…
- Q95'Meteor Electronics' offers a 5% discount for invoices settled within 14 days. A customer misses the deadline and pays the full list…
- Q96In a manual bookkeeping system, the 'Folio' column in a Cash Book helps a bookkeeper to do what?
- Q97A petty cashier is assigned an imprest of Rs. 8,000. Under what circumstance would the main cashier reimburse more than Rs. 8,000 to the…
- Q98Which of the following is typically NOT a valid source document for entries in the petty cash book?