Accounting For Receipts From Receivables And Prompt Payment Discounts Flashcards
(9 cards)
When a Receivable makes a payment for an amount owed, the double entry is:
Debit : bank account
Credit : receivable account
What is the debit to the bank account recognising?
The increase in our funds.. we have received money from receivables
What is the credit entry in the receivable account used for?
Reduce the receivable balance now that the receivable has made a payment to reduce what they owed to the business
Where will the amounts be recorded when initially recording receipt from a receivable?
Into the cash received book
What does prompt payment affect?
The receivable account, the VAT account and a discounts allowed account
When accounting for a discount allowed to a credit customer, we do not revise what?
The original sales value, instead we recognise an expense for this discount
Where do you initially record a prompt payment discount allowed to a cust?
The amounts will be recorded into the discounts allowed day book
What does the discounts allowed day book get reproduced with?
A summary of the accounting entries required to the general ledger
The accounting entries for a prompt payment discount are
Debit discounts allowed account with the net amount
Debit vat account with the VAT amount
Credit receivable account with the gross amount
