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FA1 specimen exam Question 50 (Help!)

+2 Votes
FA1 specimen exam Question 50 (Help!)

Hi everyone,
I would like to ask the question that appears in FA1 specimen exam.

Question 50
The following statements relate to the sales ledger control account:

  1. Trade discounts will not be recorded in the sales ledger control account.
  2. The allowance for the irrecoverable debts is recorded in the sales ledger control account

Which of the above statements are correct ?

A. Neither 1 nor 2
B. Both 1 and 2
C. 1 only
D. 2 only

Answer provided is A
Why Statement 1 is not correct ? Isn't that trade discount will not be recorded in the sales ledger control account ?
Seeking for advice.

October 8th 2018 AN ACCA USER 160 Points

2 Replies

0 Votes

Trade discounts are given (unconditionally) at the point of sale, so an invoice amount will be net of the discount. As only the net amount is then recorded, the sales ledger control account will not have any entries for trade discounts.

If a settlement discount is offered (i.e. for payment within a specified period), whether or not the customer takes advantage of the discount will only be confirmed when the customer pays. If the customer takes advantage of the discount the double entry is Dr Sales (revenue)/Cr Receivables - i.e. this would be recorded in the sale ledger control a/c.

November 21st 2018 AN ACCA USER 2,080 Points
0 Votes

Trade discounts are simply a reduction in the price of goods sold. For example if goods cost 5000 but the shopkeeper gives me a trade discount of 500 the double entry is DR PURCHASES 4500 CR PAYABLES 4500.
Irrecoverable debts are also not recorded in the sales ledger control account. Double entry is DR RECEIVABLES EXPENSE CR RECEIVABLES CONTROL ACCOUNT

3 Days Ago AN ACCA USER 140 Points
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