Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 47 - No. 47)
A company purchased goods on credit and was offered a discount for early payment. The company paid within the discount period. How would the company record the payment?
Debit Accounts Payable, Credit Cash, Credit Purchases Discount
Debit Purchases, Credit Cash, Credit Accounts Payable
Debit Cash, Credit Accounts Payable, Credit Purchases Discount
Debit Accounts Payable, Credit Cash
Explanation
The company debits Accounts Payable (to reduce the liability), credits Cash (for the amount paid), and credits Purchases Discount (to reflect the discount).
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