Question

Discount Allowed appearing in the Trial Balance are shown:

• A. On the debit side of Trading Account
• B. On the debit side of Profit & Loss A/c
• C. On the Assets side of the Balance Sheet.
• D. None of these

Answer 1

Answer: (B)

On the debit side of Profit & Loss A/c

Profit and loss account records the indirect expenses and incomes which is not the main purpose of the business. Expenses are debited and incomes are credited to the profit and loss account. Discount allowed is the part of income which is sacrificed by the firm. It is the incentive given to the debtors for early payments. Since it is a reduction in the revenue of the year, it is shown on the debit side of the profit and loss account