One Response to “Is The Account “purchase Discounts” Only Applicable For Inventory?”

  1. Old Guy says:

    Purchases Discounts should only be used to record cash discounts taken when paying for inventory purchased on account. A cash discount taken when paying for a non-inventory item, such as supplies, should be credited to the account that was debited when the item was bought. For example:
    When the supplies were bought:
    Debit Office Supplies 100
    Credit Accounts Payable 100
    When the invoice is paid:
    Debit Accounts Payable 100
    Credit Office Supplies 2
    Credit Cash 98
    This results in the supplies being recorded at their actual cost of 98.

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