Which of the following entries is correct in respect of reserve for discounts on accounts payable?
A)Debit P&L A/c and Credit Reserve for Discount on Accounts Payable A/c
B)Debit Accounts Payable A/c and Credit P&L A/c
C)Debit Reserve for Discount on Accounts Payable A/c and Credit P&L A/c
D)Debit Reserve for Discount on Accounts Payable A/c and credit Accounts Payable A/c

Question

Quizplus · Accepted Answer

Creating a reserve for discounts on accounts payable involves anticipating the discounts a company expects to receive for paying its suppliers early. This is recorded by debiting the Reserve for Discount on Accounts Payable account and crediting the Profit and Loss Account, reflecting the expected savings as an expense reduction.

Which of the Following Entries Is Correct in Respect of Reserve