Question

Q : Paredes records sales at the gross amount and uses a sales discount account to account for the the discounts taken by customers. Paredes provides services for $1,000 with terms 2/10, n/30. The entry to record this transaction will include a :

Answer 1

The entry to record a service for $1,000 with terms 2/10, n/30 includes debiting Accounts Receivable and crediting Sales Revenue for the gross amount. If the discount is taken, the difference is recorded in a Sales Discount account.

Step-by-step explanation:

The question relates to accounting and specifically to the recording of sales transactions with a discount offered. When Paredes provides services for $1,000 on terms 2/10, n/30, the initial entry in the accounting records is to recognize the sales revenue at its gross amount and any subsequent discounts taken would be accounted for in a separate sales discount account.

The initial transaction is recorded by debiting Accounts Receivable for $1,000 and crediting Sales Revenue for $1,000. If the customer pays within 10 days and takes advantage of the 2% discount, the Sales Discount account will be debited and Accounts Receivable will be credited for the discount amount, which would be $20 in this case (2% of $1,000).