FINAL ACCOUNTS – PROVISION FOR DISCOUNTS 2

FINANCIAL ACCOUNTING SSS2 FIRST TERM        

WEEK 3

FINAL ACCOUNTS – PROVISION FOR DISCOUNTS

Performance Objectives

Students should be able to:

1.       Explain the following terms

          (a)  Discounts Allowed     (b) Cash Discounts

2.       State two differences between Discount Allowed and Discount Received

Contents

If a trader usually allows and receives cash discounts the debtor's and creditors' balances in The Balance Sheet at the end of the year may be overstated unless it is recognized that discounts

are likely to be deducted from them.  This is done by creating provisions for discounts on

debtors and provisions for discounts on creditors.

PROVISION FOR DISCOUNTS ON DEBTORS

This is a charge made against profit in order to provide for an expected loss in…