College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570



College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

Which of the following statements is true?

  1. a. Sales discounts are taken on freight charges.
  2. b. Credit terms are established by the buyer.
  3. c. Purchases discounts are taken on returns.
  4. d. Purchases discounts are not taken on freight costs.
  5. e. None of the above.

To determine

Identify the statement which is true.


Justification for correct answer

  • Option (d): Buyer considers the cash discount as purchase discount. The purchases discount does not taken on freight charges because it is billed separately on an invoice. Therefore, the option (d) is the correct answer.

Justification for incorrect answer

  • Option (a): Sales discounts accounts like sales returns and allowances, is a contra revenue account...

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