Acca financial Accounting (FA) Study Text ac ca (FA)

Chapter 5 

KAPLAN PUBLISHING

 

75 

In practice, an entity should adopt one of the following approaches to deal with 

this situation depending upon whether it expects the customer to take 

advantage of the discount: 

•

 

prepare the sales invoice for the full amount if the customer is not 

expected to pay early and claim the settlement discount. If, as expected, 

the customer does not pay early, the full amount is due as normal, or 

•

 

prepare the invoice for the reduced amount (after applying the settlement 

discount) if the customer is expected to pay early and be entitled to the 

settlement discount. Subsequently, if the customer does not pay early and 

is no longer entitled to the discount, the full amount is due and the 

additional amount received would be treated as revenue from the original 

sales transaction, or 

•

 

the entity could raise a further invoice for the discount not taken.