MANAGEMENT

Detailed explanation-1: -Accounting for a Sales Discount The sales discount account is a contra revenue account, which means that it reduces total revenues.

Detailed explanation-2: -If a customer takes advantage of these terms and pays less than the full amount of an invoice, the seller records the discount as a debit to the sales discounts account and a credit to the accounts receivable account.

Detailed explanation-3: -The net method and gross method journal entries are provided below: The net method records the receivables at the sale price less the cash discount. The company would need to make an adjustment for the interest earned if the customer does not take advantage of the discount.

Detailed explanation-4: -When the company elects to take the early pay discount, they would debit accounts payable for the full invoice amount, then record a credit to early pay discount and the remaining amount to cash (the early pay discount reduces the amount of cash the company must pay).