Day: March 14, 2020

A firm that sells exclusively on credit allows a discount of 2% to its customers if they pay by the due date, which they always do.

The following details’ are available for the firm’s most recent financial year:

• Amount owed by debtors at the beginning of the year £22,000
• Amount owed by debtors at the end of the year £24,000
• Bad debts written off during the year £3,500
• Money received from debtors during the year £147,000

The firm‘s credit sales for the year were?

Select ONE answer:

1. £148,469
2. £152,500
3. £155,500
4. £155,612

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
4. Not correct

Answer 3:

Because 2% discount on £147,000 = 98% debt owed received. Therefore discount = £3,000

DebtorsDr Balance b/d £22,000
Dr Bad Debt Recovered £0
Dr Sales (Credit) £155,500
Dr Totals £177,500
Cr Bank £147,000
Cr Bank (Bad Debt Recovered) £0
Cr Discount Allowed £3,000
Cr Bad Debts £3,500
Cr Balance c/d £24,000
Cr Totals £177,500

 

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