Accounting Equation

 
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  1. Bought trading stock on credit for R500.

  2. Sold goods on credit for R1000, the cost of the goods was R700.

  3. Settled creditors account of R500 with cash payment. Note: Bank is in overdraft.

  4. Debtor settles account of R400. A discount of R100 was allowed.

A = OE + L

OE = A - L

L= A - OE

Discounts

  • Discounts allowed - discounts given to debtors who pay on time 

-       Recorded as an expense to the business, decreases debtors control account

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  • Discount received - discounts given to the business by creditors for prompt payments in settlement of our accounts. 

-       Recorded as an income to the business, decreases the amount of money we owe the creditors therefore decreases creditors control 

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References

  • Anon., 2007. The Answer series: Grade 11 Accounting. 2007 ed. Cape Town: The Answer.

  • Anon., 2019. Investopedia. [Online]. Available at: https://www.investopedia.com/ [Accessed 3 October 2019].

  • Doctor, K., 2015. FLIPHTML5. [Online]. Available at: http://fliphtml5.com/fkul/mgtf/basic [Accessed 1 October 2019].

  • T Hall, D. W. P. S. A. A. P. G. P. F., 2017. Accounting Study Guide. 2016 ed. Musgrave: New Generation Publishers .

Neha Pillay (2019)

Grade 10Keroshan PillayComment