Question

Cash discount does not appear in the books of accounts.

• A. True
• B. False

Answer 1

The correct option is B False

Discounts are two types:

Trade Discount is a discount which is allowed to the customers to promote the sales. Its allowed on list price and general discount available to all the customers. Trade discount is not recorded in books of account.

Cash discount is allowed to the customer to whom the goods sold on credit. Cash discount is allowed to speed up the cash collection. Its allowed to the customer if the payment is done within the specified period. Cash discount is a an indirect expenses and to be debited in profit & loss account.