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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Discuss the advantages and disadvantages of the two methods of accounting for purchases discounts taken in regard to management’s needs, inventory cost, and the valuation of accounts payable.
Identify the pros and cons of the two accounting methods for purchases discount taken with reference to management’s need, the inventory cost and the valuation of the accounts payable.
The two accounting methods for recording purchases discount are:
- Gross Price Method:
The gross price method ensures that the purchases are recorded at the gross price and any discount taken is deducted when they are taken.
- They tend to include all the discounts, even if it is lost in the inventory.
- However, this method provides the correct value of inventory only if all the discounts are taken by the company...
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