CA Foundation Exam > CA Foundation Questions > If a company has a discount received of $18,0...
Start Learning for Free
If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?
- a)Net gain of $1,000
- b)Net loss of $1,000
- c)No effect
- d)Net gain of $37,000
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
If a company has a discount received of $18,000 and a discount allowed...
The net effect on the Profit and Loss Account is the difference between the discount received and the discount allowed.
Net Effect = Discount Received - Discount Allowed
Net Effect = $18,000 - $19,000 = Net loss of $1,000
View all questions of this test
Net Effect = Discount Received - Discount Allowed
Net Effect = $18,000 - $19,000 = Net loss of $1,000
Most Upvoted Answer
If a company has a discount received of $18,000 and a discount allowed...
Understanding Discounts in Financial Terms
In financial accounting, discounts can significantly impact the Profit and Loss Account. Here, we analyze the effects of discounts received and allowed on a company's financial performance.
Definitions
- Discount Received: This is a reduction in the amount payable to suppliers or creditors, amounting to $18,000 in this scenario. It represents a gain for the company.
- Discount Allowed: This refers to the reduction in sales price granted to customers, totaling $19,000. It represents a loss for the company.
Calculating the Net Effect
To determine the net effect on the Profit and Loss Account, we need to calculate the difference between the discounts received and allowed:
- Total Discounts:
- Discounts Received: +$18,000
- Discounts Allowed: -$19,000
- Net Effect:
- Net Effect = Discounts Received - Discounts Allowed
- Net Effect = $18,000 - $19,000 = -$1,000
Conclusion
The resulting net effect is a loss of $1,000. This means that the discounts allowed exceeded the discounts received, leading to a negative impact on the company's profitability.
Final Outcome
- The correct answer is option 'B': Net loss of $1,000.
Understanding the interplay of discounts helps in better financial decision-making and accurate reporting in the Profit and Loss Account.
In financial accounting, discounts can significantly impact the Profit and Loss Account. Here, we analyze the effects of discounts received and allowed on a company's financial performance.
Definitions
- Discount Received: This is a reduction in the amount payable to suppliers or creditors, amounting to $18,000 in this scenario. It represents a gain for the company.
- Discount Allowed: This refers to the reduction in sales price granted to customers, totaling $19,000. It represents a loss for the company.
Calculating the Net Effect
To determine the net effect on the Profit and Loss Account, we need to calculate the difference between the discounts received and allowed:
- Total Discounts:
- Discounts Received: +$18,000
- Discounts Allowed: -$19,000
- Net Effect:
- Net Effect = Discounts Received - Discounts Allowed
- Net Effect = $18,000 - $19,000 = -$1,000
Conclusion
The resulting net effect is a loss of $1,000. This means that the discounts allowed exceeded the discounts received, leading to a negative impact on the company's profitability.
Final Outcome
- The correct answer is option 'B': Net loss of $1,000.
Understanding the interplay of discounts helps in better financial decision-making and accurate reporting in the Profit and Loss Account.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer?
Question Description
If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer?.
If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer?.
Solutions for If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer?, a detailed solution for If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? has been provided alongside types of If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice If a company has a discount received of $18,000 and a discount allowed of $19,000, what is the net effect on the Profit and Loss Account?a)Net gain of $1,000b)Net loss of $1,000c)No effectd)Net gain of $37,000Correct answer is option 'B'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup