A company using the net method of recording purchases failed to take advantage of a discount available. When they pay the full (gross) amount of an invoice at the end of the credit period the journal entry will include a debit to:
A) Merchandise Inventory.
B) Sales Discounts.
C) Discounts Lost.
D) Cash.
E) Accounts Receivable.

Question

Quizplus · Accepted Answer

The company failed to take advantage of the discount, so they lost the discount. The correct account to debit in this case is Discounts Lost.

A Company Using the Net Method of Recording Purchases Failed