PRINCIPLES OF ACCOUNTS

AN EXAMPLE OF A CREDIT ENTRY IN A PROFIT AND LOSS ACCOUNT IS

  • A. carriage inwards
  • B. carriage outwards
  • C. discounts allowed
  • D. discounts received ✓

 

Discounts received are considered as income for a business and are recorded as a credit entry in the profit and loss account. When a business receives discounts from its suppliers or other entities, it reflects as a positive impact on the financial performance of the company.

In other words, a credit entry in a profit and loss account represents income or gains for the business. In this case, an example of a credit entry would be “discounts received.” When a business receives discounts from suppliers or other parties, it is recorded as income in the profit and loss account.

“Discounts received” is considered a credit entry because it increases the overall income of the business. This type of entry reflects a positive impact on the financial performance of the company, as it represents savings or benefits received by the business.

In contrast, “discounts allowed” would be a debit entry in the profit and loss account. This is because discounts allowed represent a reduction in revenue or income for the business, leading to a decrease in overall profitability.

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