I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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Chippies expects Table Tops to take advantage of the discount. Therefore the invoiced sales value less 

the discount, ie $7,220 ($7,600 less 5%) is recorded as revenue, with a corresponding amount in 

trade receivables: 

Accounting for the sale 

DEBIT 

 Trade 

receivables 

  $7,220 

CREDIT Sales 

      $7,220 

Accounting for payment received 

Accounting for the payment depends on whether or not the customer takes up the discount, 

as shown below. 

Customer does not take the discount 

Table Tops pays the full amount of $7,600: 

DEBIT 

 Bank 

    $7,600 

CREDIT Trade 

receivables 

    $7,600 

The discount not taken of $380 is then credited to revenue: 

DEBIT 

 Trade 

receivables 

  $380 

CREDIT Sales 

      $380 

Customer takes the discount 

Table Tops pays  $7,220 7 days later:  

DEBIT 

 Bank 

    $7,220 

CREDIT Trade 

receivables: 

 

    $7,220 

2.2.3.2 Example: Settlement discounts allowed 2 

Using the same information from the previous example, let’s see how you would account for the sale if 

Chippies did not expect Table Tops to take the discount.  

In this scenario, the full invoiced sales value, ie $7,600 is recorded as revenue, with a corresponding 

amount in trade receivables: 

Accounting for the sale 

DEBIT 

 Trade 

receivables 

  $7,600 

CREDIT Sales 

      $7,600 

Accounting for payment received 

Again, accounting for the payment depends on whether or not the customer takes up the discount, as 

shown below. 

Customer does not take the discount 

Table Tops pays the full amount of $7,600: 

DEBIT 

 Bank 

    $7,600 

CREDIT Trade 

receivables 

    $7,600 

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