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

Chapter 5 

KAPLAN PUBLISHING

 

77 

 

 

In this situation, settlement discount allowed is excluded from the 

accounting records in the same way as trade discount is excluded 

from the accounting records. If, as expected, the customer paid 

within ten days to take advantage of the early settlement terms, 

the receipt of cash would be recorded as follows: 

 $ 

Debit: Cash 

194 

Credit: Receivables 

194 

If, however, the customer did not take advantage of the early 

settlement terms, the full amount of $200 would be due. When 

received, the ‘additional’ cash receipt would be accounted for as if 

it was a cash sale as follows: 

 $ 

Debit: Cash 

200 

Credit: Receivables 

194 

Credit: Revenue 

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