In order to induce prompt payment, the Swope Company offers a cash discount of 2% to customers

Question:

In order to induce prompt payment, the Swope Company offers a cash discount of 2% to customers who make payment on their account within 10 days of the invoice date. The company’s bookkeeper is not sure how these discounts should be recorded.

Required
1. Explain the methods of recording with cash discounts.
2. Discuss the theoretical soundness of each method.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...