chapter 4

Question 1

what are ledger accounts?

Answer 1

ledger accounts of all transactions relating to specific asset, liability, equity, income or expense.

Question 2

what is trade discount?

Answer 2

reduction to the list price of goods

Question 3

what does trade discount do?

Answer 3

given to encourage customers to buy in bulk and used to encourage their patronage and loyalty.

trade discount is not recorded.

Question 4

what is cash discount?

Answer 4

reduction to invoiced price

Question 5

what does cash discount do?

Answer 5

given to encourage credit customers to pay early, normally in a specified amount of time.

Recorded as discount allowed/ received

Question 6

what is the difference between cash discounts and trade discounts?

Answer 6

1. trade discount is the reduction to the list price of goods but cash discount is the reduction to invoiced price.
2. trade discount is not recorded in ledger but cash discount is recorded in ledger