Answer:
In net method the discount not given is recorded as revenue and in gross method the discount allowed is recorded as expense.
Explanation:
ECG Company
Journal Entries
<u>Net Method</u>
Date Particulars Debit Credit
1 March Accounts Receivable 19400
Accounts Receivable 29,100
Sales 48500
( Calculation of net Sales ( 20,000* 3% = 600, 30,000* 3%= 900) 20,000- 600= 19,400 and 30,000- 900= 29,100)
8 Mar Cash 19400
Accounts Receivable 19400
Receipt of 20,000 Sales within discount period.
25 Mar Cash 30,000
Accounts Receivable 29,100
Interest Revenue 900
Receipt of payment after discount time period.
<u>Gross Method</u>
1 March Accounts Receivable 20,000 Dr
Accounts Receivable 30,000 Dr
Sales 50,000 Cr
Transactions of Sales on gross method. Here discount is not calculated unless given.
8 Mar Cash 19400 Dr
Discount Allowed 600 Dr
Accounts Receivable 20,000 Cr
Receipt of 20,000 Sales within discount period.
25 Mar Cash 30,000 Cr
Accounts Receivable 30,000 Cr
Receipt of Sales of 30,000 after the discount period.
