Final answer:
The correct option is d, meaning both statements 2 and 3 are true regarding accounts payable and the accounting practices associated with them, including recording the net amount with purchase discounts and gross amount with purchase discounts lost.
Step-by-step explanation:
The correct answer to the question 'Which of the following is true about accounts payable?' is option d. Both 2 and 3 are true. Let's explore these concepts further:
- Accounts payable, often referred to as trade accounts payable, represent short-term obligations to suppliers of goods and services that were purchased on credit.
- When accounts payable are recorded at the net amount, it implies that the business is taking advantage of early payment discounts offered by a supplier, and a Purchase Discounts account will typically be credited to record this discount.
- If the accounts payable are recorded at the gross amount, any discounts not taken (often due to late payment) may be recorded in a Purchase Discounts Lost account, which is a type of expense account reflecting the lost opportunity to save money on the purchase.
Both statements about how accounts payable can be recorded, with regard to early payment discounts and lost discounts, are in practice across different accounting systems.