Asked by David Oyenuga on May 28, 2024
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Payment for merchandise sold on credit for $250 subject to 1/10, n/30 was received within the discount period-$247.50 was received. This was recorded with a debit to Sales Discounts for $2.50, a debit to Cash for $247.50, and a credit to Accounts Receivable $250, but no mention was made of the subsidiary ledger account. This error will cause:
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the control account to not agree with the subsidiary ledger.
D) the assets to be overstated.
Sales Discounts
Reductions in the price of goods or services offered to customers to encourage prompt payment or as part of a sales promotion.
Control Account
An account used in the general ledger to summarize transactions detailed in subsidiary ledgers for efficient reporting and verification purposes.
Subsidiary Ledger
A detailed ledger that contains the transaction details of accounts like accounts receivable or payable, which are summarized in the general ledger.
- Comprehend the effects of miscalculations in discounts on the financial statements.
- Comprehend the purpose and mechanics behind subsidiary ledgers and controlling accounts.
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Learning Objectives
- Comprehend the effects of miscalculations in discounts on the financial statements.
- Comprehend the purpose and mechanics behind subsidiary ledgers and controlling accounts.
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