Question

Q : Kim Corp. provides services at the gross amount and uses a discount account to account for the discounts taken by customers. Kim provides services on account for $5,000 with terms 2/10, n/30. Recording this transaction will include a :

Answer 1

Kim Corp. records a transaction by debiting Accounts Receivable and crediting Service Revenue for $5,000. The terms 2/10, n/30 imply a possible future discount entry if the customer pays early.

Step-by-step explanation:

The subject of the question is a business accounting scenario in which Kim Corp. provides services on account with sales terms 2/10, n/30. When Kim Corp. records this transaction, it will debit Accounts Receivable for the gross amount of the service provided, which is $5,000, and credit Service Revenue for the same amount. The terms 2/10, n/30 indicate that the customer can take a 2% discount if the payment is made within 10 days; otherwise, the net amount is due in 30 days. If the customer takes advantage of this discount, the company will later make an additional entry to account for the discount.