How do you record a sale with a 2/10, net 30 discount?

How do you record a sale with a 2/10, net 30 discount?

• A. Debit Cash; Credit Revenue
• B. If paid within 10 days: Debit Cash (net of discount); Debit Sales Discounts; Credit Accounts Receivable for the full amount
• C. Debit Accounts Receivable; Credit Cash for the net amount
• D. Debit Accounts Receivable; Credit Sales Revenue

Answer: (B)

The main idea is how to reflect a sales discount in accrual accounting. When a sale is made on credit, you record the full amount as revenue and the receivable. If the customer pays within the discount window, you recognize the cash received net of the discount and record the discount as a reduction of revenue using a Sales Discounts (contra-revenue) account. So, you would debit Cash for the net amount (original price minus the discount), debit Sales Discounts for the discount amount, and credit Accounts Receivable for the original full amount. This matches the description of receiving the net cash and separately recognizing the discount, while removing the receivable for the full original sale.

The main idea is how to reflect a sales discount in accrual accounting. When a sale is made on credit, you record the full amount as revenue and the receivable. If the customer pays within the discount window, you recognize the cash received net of the discount and record the discount as a reduction of revenue using a Sales Discounts (contra-revenue) account.

So, you would debit Cash for the net amount (original price minus the discount), debit Sales Discounts for the discount amount, and credit Accounts Receivable for the original full amount. This matches the description of receiving the net cash and separately recognizing the discount, while removing the receivable for the full original sale.