Question

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.

Answer 1

Hi, yes Trade Discounts are DEDUCTED from the List Price in the INVOICE.

In the Receivable Ledger Control A/c we record the Net Amount, that can be found as

                         INVOICE

List Price 10000
Trade Discount (1000)
(10%)
Net Amount 9000 (Amount shown in R.L.C.A)

Hope this clears up the confusion.
Good Luck