Question

If a company employs the gross method of recording accounts receivable from customers, then sales discounts taken should be reported as:a. an item of "other expense" in the income statement.b. a deduction from accounts receivable in determining the net realizable value of accounts receivable.c. sales discounts forfeited in the cost of goods sold section of the income statement.d. a deduction from sales in the income statement.

Answer 1

Answer:

d. a deduction from sales in the income statement.

Explanation:

Sales discount: The discount which is given at the time of sale.

The treatment of sales discount is shown below:

Net sales = Sales revenue - sales discount - sales return and allowances

The sales discount is always deducted from the sales revenue to get the net sales amount , and this treatment is shown on the credit side of the income statement. As the income is received so sales account should be credited.

Hence, all other options are incorrect except d. option