RECEIPTS FROM DEBTORS and DISCOUNTS ALLOWED GRADE 10

RECEIPTS FROM DEBTORS and DISCOUNTS ALLOWED GRADE 10 ACCOUNTING MODULE 3 LESSON 4

Transaction: A debtor owing R 550 pays R 300 off on his account. Source doc: Business issues a RECEIPT and keeps the duplicate for itself B/S if electronic payment Journal: Cash Receipts Journal (recorded in the Debtors Control column) RECEIPTS FROM DEBTORS

�To encourage prompt payment many dealers offer discounts to their customers. �The discount is usually indicated on the invoice e. g. Terms: 30 days less 5%. This implies that if the customer settles within 30 days, he is allowed to deduct 5% off the invoice price. ENCOURAGING PROMPT PAYMENT

�Discount Allowed to debtors is recorded in the Discount Allowed account ◦ an EXPENSE account �It’s an expense because the business is receiving less money that it was originally supposed to receive. �The source document is also the receipt. RECORDING DISCOUNT ALLOWED

�The cash receipt and discount allowed are both entered in the CRJ Bank Sales Cost of sales Debtors Control Receipts Discount Allowed Discount amount Details A of Rec Actual amount received D o D c ENTRIES FOR CASH RECEIPTS & DISCOUNT ALLOWED

�Cash received from the debtor ◦ Dr Bank (with the actual amount received) ◦ Cr Debtors Control (with the actual amount received) ◦ Cr the individual debtor in the Debtors Ledger (with the actual amount received) �Discount allowed to the debtor ◦ Dr Discount Allowed (with the discount amount) ◦ Cr Debtors Control (with the discount amount) ◦ Cr the individual debtor in the Debtors Ledger (with the discount amount) ENTRIES FOR CASH RECEIPTS & DISCOUNT ALLOWED

�A debtor may make a payment via the internet (an electronic payment) EFT �The payment and discount allowed (if any) are recorded in the CRJ in the normal way �The source document is the bank statement (B/S) �The credit in the bank statement serves as proof but some businesses will still issue a receipt ELECTRONIC RECEIPTS FROM DEBTORS

DIFF. WAYS OF CALCULATING RECEIPTS: �Discounts are sometimes calculated as a percentage ◦ A debtor owing R 200 settles his account less 5%: ◦ Amount received is R 190; discount allowed R 10 �The amount of the discount may be stipulated ◦ A debtor paid R 150 towards his account; discount R 12: ◦ Amount received is R 150; discount allowed R 12 CALCULATING RECEIPTS FROM DEBTORS

�The amount of the discount may not be stipulated ◦ A debtor owing R 300 settled his account with a EFT for R 280: ◦ Amount received is R 280; discount allowed R 20. �The amount paid is subject to discount ◦ A debtor paid R 500. This payment is subject to a 10% discount: ◦ Amount received is R 500; discount allowed R 50. CALCULATING RECEIPTS FROM DEBTORS