A customer receives a discount for prompt payment. The customer had bought goods for $782 including GST. The prompt payment discount is $23 including GST. What is the correct journal entry to record this transaction?Question 8Answera.DR Bank $759; DR Sales Revenue $20; DR GST Clearing $3; and CR Accounts Receivable $782b.DR Bank $759; DR Sales Revenue $23; CR GST Clearing $3; and CR Accounts Receivable $779c.DR Bank $782; CR Discount Allowed $20; CR GST Clearing $3; and CR Accounts Receivable $759d.DR Bank $759; DR Discount Allowed $20; DR GST Clearing $3; and CR Accounts Receivable $782
Question
A customer receives a discount for prompt payment. The customer had bought goods for 23 including GST. What is the correct journal entry to record this transaction?Question 8Answera.DR Bank 20; DR GST Clearing 782b.DR Bank 23; CR GST Clearing 779c.DR Bank 20; CR GST Clearing 759d.DR Bank 20; DR GST Clearing 782
Solution
The correct journal entry to record this transaction would be:
DR Bank 20; DR GST Clearing 782
Here's the step by step explanation:
- The customer pays 759.
- The discount allowed is 20.
- The GST on the discount is 3.
- The total amount that was receivable was 782.
This journal entry reflects that the customer has paid less due to the prompt payment discount, and the business has received the payment, cleared the GST, and reduced the amount in the accounts receivable.
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