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Issue for Consideration Other Than Cash

A discount of...

Question

A discount of Rs 2000 was given to a supplier on his prompt repayment of debt but the cashier did not enter in the cash book. What should be the adjustment in cash to work out the correct balance of cash book?

A

Rs 2000 will be debited in cash book

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B

Rs 2000 will be credited in cash book

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C

Rs 4000 will be debited in cash book

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D

Rs 4000 will be credited in the cash book

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Solution

The correct option is A Rs 2000 will be credited in cash book
A discount of Rs. 2000 given to the supplier on his prompt repayment of debt will reduce the amount of cash that the business will receive by Rs. 2000. A reduction in cash received is equivalent to the situation when cash goes out. So, Rs. 2000 will be credited in cash book as cash book is debited when cash comes in and credited when cash goes out.

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