Skip to content

CSEET · Fundamentals of Accounting · Accounting Process

A business owner paid Rs 20,000 to Gupta, a creditor, in full settlement of Rs 21,500 by cheque. Later, a compound entry is passed to record this. Which of the following is correct?

Gupta A/c is debited Rs 21,500, with Bank A/c credited Rs 20,000 and Discount Received A/c credited Rs 1,500. The creditor's full dues are cleared, cash goes out, and the amount saved is an income called discount received.

  1. AGupta A/c Dr 21,500 to Bank A/c 20,000 and Discount Received A/c 1,500Correct
  2. BGupta A/c Dr 20,000 and Discount Allowed A/c Dr 1,500 to Bank A/c 21,500
  3. CGupta A/c Dr 21,500 to Bank A/c 20,000 and Discount Allowed A/c 1,500
  4. DBank A/c Dr 20,000 and Discount Received A/c Dr 1,500 to Gupta A/c 21,500

Explanation

The creditor's account is cleared by debiting Rs 21,500. Bank pays Rs 20,000 so it is credited. The Rs 1,500 balance is a gain, discount received, which is credited. Discount allowed applies only when customers get a discount.

Did you get it right without looking?

One question tells you little. A timed set on Accounting Process shows your real accuracy, how long you take and where you lose marks.

Practise Accounting ProcessFree diagnostic mock

More Accounting Process questions