The entry to record payment of a voucher for an invoice within the discount period under the gross method will include:
A)a debit to Purchase Discounts.
B)a credit to Purchase Discounts.
C)a credit to Cash.
D)Both B and C would be in the entry.

Question

Quizplus · Accepted Answer

Under the gross method, the purchase discount is not recorded at the time of purchase. Instead, the full amount of the invoice is recorded as a debit to the accounts payable and a credit to the inventory or expense account. When the payment is made and the discount is taken, the accounts payable is reduced by the discounted amount and the discount is recorded separately as a credit to purchase discounts. The entry to record payment of a voucher for an invoice within the discount period under the gross method will include a credit to cash for the amount paid, and a credit to purchase discounts for the discount taken. Therefore, both choice B and C would be in the entry.

The Entry to Record Payment of a Voucher for an Invoice