Subsidiary Books

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Questions and Answers
  • 1. 

    Purchases book records:

    • A.

      All cash purchases.

    • B.

      Ail credit purchases.

    • C.

      Credit purchases of goods in trade.

    • D.

      None of the above.

    Correct Answer
    C. Credit purchases of goods in trade.
    Explanation
    The correct answer is "Credit purchases of goods in trade." This is because the purchases book is used to record all credit purchases made specifically for goods in trade. It does not include cash purchases or credit purchases for other purposes.

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  • 2. 

    Which of the following types of information are found in subsidiary ledgers, but not in the general ledger?

    • A.

      Total cost of goods sold for the period.

    • B.

      The quantity of a particular product sold during the period.

    • C.

      The amount owed to a particular creditor

    • D.

      The portion of total current assets that consist of cash.

    Correct Answer
    B. The quantity of a particular product sold during the period.
    Explanation
    Subsidiary ledgers contain detailed information about specific accounts, such as individual customer accounts or inventory accounts. They provide more specific information that is not included in the general ledger. The quantity of a particular product sold during the period is a specific piece of information that would be recorded in a subsidiary ledger, as it pertains to a specific inventory account. The general ledger would only contain summarized information about the total cost of goods sold for the period, not the specific quantity of each product sold.

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  • 3. 

    Passed only when 

    • A.

      Double column cash book is prepared

    • B.

      Three-column cash book is prepared

    • C.

      Simple cash book is prepared

    • D.

      None of the above

    Correct Answer
    B. Three-column cash book is prepared
    Explanation
    A three-column cash book is prepared because it allows for a more detailed recording of cash transactions compared to a simple cash book. The three columns in the cash book include the Cash column, Bank column, and Discount column. The Cash column is used to record cash receipts and payments, the Bank column is used to record transactions related to the bank account, and the Discount column is used to record any discounts given or received. This type of cash book provides a more comprehensive overview of cash and bank transactions, making it easier to track and reconcile accounts.

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  • 4. 

    The balance of the petty cash is__________  

    • A.

      An expense

    • B.

      Income

    • C.

      An asset

    • D.

      Liability

    Correct Answer
    C. An asset
    Explanation
    The balance of the petty cash is considered an asset because it represents the amount of cash that the company currently has on hand. Petty cash is a small amount of money that is set aside for minor expenses, such as office supplies or small purchases. As an asset, the balance of the petty cash is recorded on the company's balance sheet and is included in the calculation of the company's total assets.

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  • 5. 

    A _________ is sent to a customer when he returns the goods.                                 

    • A.

      Debit note

    • B.

      Credit note

    • C.

      Proforma invoice

    • D.

      None of the above

    Correct Answer
    B. Credit note
    Explanation
    A credit note is sent to a customer when he returns the goods. A credit note is a document issued by a seller to a buyer, indicating that the buyer's account has been credited with a certain amount. In this case, the credit note is sent to the customer to acknowledge the return of goods and to adjust the customer's account accordingly, providing them with a credit for the returned items.

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  • 6. 

    M/s Delhi Stationers purchase 1,000 pes of cover file @ Rs. 275 per 100. The wholesaler offered 5% sales tax on net price. Transport charges were Rs. 50. The purchase price per piece of cover file will be  

    • A.

      Rs.2,793.13

    • B.

      Rs.279.31

    • C.

      Rs.27.93

    • D.

      Rs.2.9375

    Correct Answer
    D. Rs.2.9375
    Explanation
    The purchase price per piece of cover file can be calculated by adding the cost of the cover file, sales tax, and transport charges.

    The cost of 1,000 pes of cover file at Rs. 275 per 100 is Rs. 2750.
    The sales tax on the net price is 5% of Rs. 2750, which is Rs. 137.50.
    The transport charges are Rs. 50.

    Therefore, the total purchase price is Rs. 2750 + Rs. 137.50 + Rs. 50 = Rs. 2937.50.

    Since we need to find the purchase price per piece, we divide the total purchase price by the number of pieces (1,000).

    Rs. 2937.50 / 1000 = Rs. 2.9375.

    Hence, the correct answer is Rs. 2.9375.

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  • 7. 

    The purchases Journal records  

    • A.

      All purchases.

    • B.

      All purchases of goods dealt in by the firm.

    • C.

      Credit purchases of goods dealt in by firm.

    • D.

      Cash purchase of goods dealt in by firm.

    Correct Answer
    C. Credit purchases of goods dealt in by firm.
    Explanation
    The purchases journal is used to record credit purchases of goods dealt in by the firm. This means that any purchases made on credit, where the firm has not yet paid for the goods, will be recorded in the purchases journal. This journal helps to keep track of the firm's liabilities and is an important part of the accounting process.

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  • 8. 

    The petty cashier generally work on__________ system.                          

    • A.

      Accrual

    • B.

      Balancing

    • C.

      Imprest

    • D.

      None of the three

    Correct Answer
    C. Imprest
    Explanation
    The correct answer is "Imprest". The term "imprest" refers to a system where a fixed amount of money is given to a petty cashier at the beginning of a specific period to cover small expenses. The petty cashier then uses this money to make payments and is responsible for keeping records of the transactions. This system helps in maintaining control over petty cash and ensures that the amount is replenished when it is exhausted or at the end of the period.

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  • 9. 

    Cash book is a form of  

    • A.

      Trial Balance

    • B.

      Journal

    • C.

      Ledger

    • D.

      All of the above

    Correct Answer
    C. Ledger
    Explanation
    A cash book is a form of ledger. It is a book of original entry where all cash transactions are recorded. It includes both cash receipts and cash payments. The cash book is an important part of the accounting system as it helps in maintaining the cash balance and provides a record of all cash transactions. Therefore, the correct answer is Ledger.

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  • 10. 

    Purchase of a fixed assets on credit basis is recorded in   ____________.                      

    • A.

      Cash book.

    • B.

      Purchases book.

    • C.

      Journal proper.

    • D.

      None of the above.

    Correct Answer
    C. Journal proper.
    Explanation
    When a fixed asset is purchased on credit, it is recorded in the Journal proper. The Journal proper is a book where all non-routine transactions, such as the purchase of fixed assets, are recorded. This book is used to record transactions that do not have a specific book or ledger dedicated to them. Therefore, the correct answer is Journal proper.

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  • 11. 

    Atul purchased goods costing Rs. 50,000 at an invoice price, which is 50% above cost. On invoice price he enjoyed 15% trade discount and Rs.3,750 cash discount on cash payment of goods in lump sum at the time of purchase. The purchase price to be recorded in the books before cash discount will be  

    • A.

      Rs.75,000

    • B.

      Rs.60,000

    • C.

      Rs.63,750

    • D.

      Rs.50,000

    Correct Answer
    C. Rs.63,750
    Explanation
    Atul purchased goods at an invoice price of Rs. 50,000, which is 50% above the cost price. This means that the cost price of the goods is 50% less than the invoice price. Therefore, the cost price of the goods is Rs. 50,000 * (100/150) = Rs. 33,333.33.

    On the invoice price, Atul enjoyed a trade discount of 15%. So, the amount after trade discount is Rs. 50,000 * (100/100 - 15/100) = Rs. 42,500.

    Additionally, Atul received a cash discount of Rs. 3,750 on cash payment of goods in lump sum. So, the final purchase price to be recorded in the books before cash discount will be Rs. 42,500 + Rs. 3,750 = Rs. 46,250.

    Therefore, the correct answer is Rs. 63,750.

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  • 12. 

    A cheque of Rs.35,000 received by M/s Nandini was endorsed to M/s Chandini on account of fullsettlement of Rs.35,500 on 1st october 2006. Chandini deposited the same into the bank on 4th October 2006,In the books of M/s Chandini, the amount to be debited on 1st October 2006 will be 

    • A.

      Cash account Rs.35,000 and discount account Rs.500.

    • B.

      Bank account Rs.35,000 and discount account Rs.500.

    • C.

      Cash account Rs.35,500.

    • D.

      Bank account Rs.35,500

    Correct Answer
    B. Bank account Rs.35,000 and discount account Rs.500.
    Explanation
    In this scenario, M/s Nandini received a cheque of Rs.35,000 and endorsed it to M/s Chandini as a full settlement of Rs.35,500. This means that M/s Chandini received Rs.35,000 in cash and a discount of Rs.500. Therefore, in the books of M/s Chandini, the amount to be debited on 1st October 2006 will be Bank account Rs.35,000 and discount account Rs.500.

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  • 13. 

    The total of the sales book is posted periodically to the credit of

    • A.

      Sales account

    • B.

      Cash book

    • C.

      Journal proper

    • D.

      None of the above

    Correct Answer
    A. Sales account
    Explanation
    The total of the sales book is posted periodically to the credit of the Sales account. This is because the sales book records all the sales made by a business, and the total of these sales needs to be transferred to the Sales account in the general ledger. By posting the total to the credit side of the Sales account, it increases the balance of the account, reflecting the total sales made by the business.

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  • 14. 

    Total of purchase return book is posted periodically to the credit of _________.

    • A.

      Purchase return account

    • B.

      Cash book

    • C.

      Journal proper

    • D.

      None of the three

    Correct Answer
    A. Purchase return account
    Explanation
    The total of the purchase return book is posted periodically to the credit of the Purchase return account. This is because the purchase return account is used to record all the returns made by the business to its suppliers. By posting the total to the credit side of this account, it reflects the reduction in the overall purchases made by the business. This helps in accurately calculating the net purchases and determining the cost of goods sold.

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  • 15. 

    Journal Proper records ____________.  

    • A.

      Bills receivables

    • B.

      Bills payables

    • C.

      Cash payments

    • D.

      Opening entry

    Correct Answer
    D. Opening entry
    Explanation
    Journal Proper records the opening entry of a business, which includes the initial capital invested by the owner or owners. This entry establishes the starting point for the business's financial transactions and helps maintain accurate records of the company's financial position. It is the first entry made in the journal and sets the foundation for all subsequent entries.

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  • 16. 

    The total of the purchase day book is posted periodically to the debit of

    • A.

      Purchases account

    • B.

      Cash book

    • C.

      Journal proper

    • D.

      None of the above

    Correct Answer
    A. Purchases account
    Explanation
    The total of the purchase day book is posted periodically to the debit of the Purchases account. This is because the purchase day book records all purchases made by the company, and the total amount is transferred to the Purchases account in the general ledger. This allows for accurate tracking of the company's purchases and helps in calculating the cost of goods sold.

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  • 17. 

    Following are the sales return of Jindal & Co. a saree dealer Date                          Credit Note 05.01.2006            201 Goyal & Co. Rampur returned 2 Polyster sarees @ 125                         10.01.2006        202 Accepted return of goods (which were sold for cash from Garf & Co. Bhiwani, 2 Kota Sarees                                                                @ Rs.50. 17.01.2006          203 Mittal & Co. Hissar returned 2 silk sarees @ Rs.325 31.01.2006                    Mohan returned one old type writer@ Rs.500. Total of sales return book will be

    • A.

      Rs.900

    • B.

      Rs.800

    • C.

      Rs.1000

    • D.

      None of the three

    Correct Answer
    A. Rs.900
    Explanation
    The total of sales return book will be Rs.900. This is because the sales return of Jindal & Co. includes the return of 2 Polyster sarees at Rs.125, the return of 2 Kota sarees at Rs.50, and the return of 2 silk sarees at Rs.325. The return of the old type writer at Rs.500 is not included in the sales return book. Therefore, the total amount of sales return is Rs.900.

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  • 18. 

    Cash column in cash book has always __________.

    • A.

      Dr. Balance

    • B.

      Cr. Balance

    • C.

      Overdraft

    • D.

      Both Dr and Cr.

    Correct Answer
    A. Dr. Balance
    Explanation
    The cash column in the cash book always shows the balance of cash on hand. This means that the total amount of cash received (debit) and the total amount of cash paid (credit) are recorded in this column. The balance in the cash column represents the amount of cash available at any given time.

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  • 19. 

    The total of the sales return book is posted periodically to the debit of

    • A.

      Sales return Account

    • B.

      Cash book

    • C.

      Journal proper

    • D.

      None of the above.

    Correct Answer
    A. Sales return Account
    Explanation
    The correct answer is Sales return Account. Sales return is a contra revenue account that is used to record the returns of goods by customers. The sales return book is a subsidiary book that records all the details of the goods returned by customers. At the end of a specific period, the total of the sales return book is posted to the debit side of the Sales return Account in the general ledger. This helps in keeping track of the total amount of goods returned by customers and allows for accurate reporting of net sales.

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  • 20. 

    A started business with Rs. 10,000 cash and Rs. 2,000 furniture. Sales amounted to Rs. 50,000 including Rs. 5000 cash sale. Rs. 10,000 sales were outstanding at the end of the year. Purchases amounted to Rs. 30,000 including Rs. 10,000 cash purchase. Rs. 15,000 has been paid to creditors. Expenses paid during the year are Rs. 19,300. Cash balance at the end will be

    • A.

      Rs 6000

    • B.

      Rs 7000

    • C.

      Rs 5700

    • D.

      Rs. 5000

    Correct Answer
    C. Rs 5700
    Explanation
    The cash balance at the end can be calculated by adding the initial cash balance, cash sales, and cash purchases, and then subtracting the outstanding sales, payments to creditors, and expenses paid during the year. In this case, the initial cash balance is Rs. 10,000, cash sales are Rs. 5,000, cash purchases are Rs. 10,000, outstanding sales are Rs. 10,000, payments to creditors are Rs. 15,000, and expenses paid during the year are Rs. 19,300. Therefore, the cash balance at the end will be Rs. 10,000 + Rs. 5,000 + Rs. 10,000 - Rs. 10,000 - Rs. 15,000 - Rs. 19,300 = Rs. 5,700.

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  • 21. 

    Bad debts entry is passed in

    • A.

      Sales book

    • B.

      Cash book

    • C.

      Journal proper

    • D.

      None of these

    Correct Answer
    C. Journal proper
    Explanation
    Bad debts entry is passed in the Journal proper because it is a non-cash transaction that needs to be recorded in the general journal. The Journal proper is used for recording all types of transactions that do not fit into the specialized books like the Sales book or Cash book. Bad debts are considered as an expense for the business and need to be recorded in the journal to reflect the accurate financial position of the company.

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  • 22. 

    Goods were sold on credit basis to XY Bros, for RS. 1,000. This will be recorded in               

    • A.

      Cash book

    • B.

      Journal proper

    • C.

      Bills receivable book

    • D.

      Sales book

    Correct Answer
    D. Sales book
    Explanation
    The sales book is used to record all sales made on credit. In this scenario, goods were sold on a credit basis to XY Bros for RS. 1,000. Therefore, this transaction would be recorded in the sales book.

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  • 23. 

    Petty expenses paid in cash are recorded in:

    • A.

      Purchase book

    • B.

      Sales book

    • C.

      Petty cash book

    • D.

      Purchase return book

    Correct Answer
    C. Petty cash book
    Explanation
    Petty expenses paid in cash are recorded in the petty cash book. The petty cash book is used to track small, regular expenses that are not significant enough to be recorded in the main cash book. It helps to maintain a record of these expenses and allows for easy reconciliation and tracking of the petty cash balance. This book is separate from the purchase book, sales book, and purchase return book, which are used for recording other types of transactions.

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  • 24. 

    Credit purchase of stationery worth Rs. 10,000 by a stationery dealer will be recorded in

    • A.

      Purchase book

    • B.

      Sales book

    • C.

      Cash book

    • D.

      None of the three

    Correct Answer
    A. Purchase book
    Explanation
    The credit purchase of stationery worth Rs. 10,000 by a stationery dealer will be recorded in the Purchase book. The Purchase book is used to record all credit purchases made by the business. Since the stationery dealer is purchasing the stationery on credit, it is considered a credit purchase and therefore should be recorded in the Purchase book. The Sales book is used to record sales made by the business, the Cash book is used to record cash transactions, and None of the three is not applicable in this scenario.

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  • 25. 

    Returns of cash sales is recorded in

    • A.

      Sales return book

    • B.

      Cash book

    • C.

      Journal proper

    • D.

      None of the three

    Correct Answer
    C. Journal proper
    Explanation
    The returns of cash sales are recorded in the Journal proper. The Journal proper is used to record transactions that do not fit into any other specialized journal. Since cash sales returns are not a regular occurrence and do not fall under the sales return book or cash book categories, they are recorded in the Journal proper. This allows for proper documentation and tracking of the returns for accounting and record-keeping purposes.

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  • 26. 

    Double column cash book records

    • A.

      Only cash transactions

    • B.

      All transactions

    • C.

      Cash and Bank transactions

    • D.

      Cash purchase and cash sale transactions

    Correct Answer
    C. Cash and Bank transactions
    Explanation
    The double column cash book is a type of accounting book that records both cash and bank transactions. It provides a detailed record of all the cash inflows and outflows, as well as the bank deposits and withdrawals. This helps in maintaining an accurate and comprehensive record of all financial transactions involving both cash and bank.

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  • 27. 

    Three column cash book records

    • A.

      Only cash transactions

    • B.

      All transactions

    • C.

      Cash, Bank and discount transactions

    • D.

      Cash purchases and cash sale transactions

    Correct Answer
    C. Cash, Bank and discount transactions
    Explanation
    The correct answer is "Cash, Bank and discount transactions". A three-column cash book is a bookkeeping record that includes columns for cash, bank, and discount transactions. This type of cash book is commonly used to track and record all cash transactions, including those involving cash payments, cash receipts, bank deposits, bank withdrawals, and discounts given or received. By including these specific columns, businesses can maintain a comprehensive record of their cash, bank, and discount activities, which is essential for accurate financial reporting and analysis.

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  • 28. 

    Opening and closing entries are recorded in :

    • A.

      Journal Proper

    • B.

      Purchase Book

    • C.

      Sales Book

    • D.

      Bill Receivable Book

    Correct Answer
    A. Journal Proper
    Explanation
    Opening and closing entries are recorded in the Journal Proper. The Journal Proper is a specialized journal used to record transactions that do not fit into any other specific journal. Opening entries are made at the beginning of an accounting period to transfer balances from the previous period's balance sheet accounts to the current period's balance sheet accounts. Closing entries are made at the end of an accounting period to transfer balances from temporary accounts (such as revenue and expense accounts) to the retained earnings account. Therefore, the Journal Proper is the appropriate place to record these entries.

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  • 29. 

    A debit note for Rs.500 issued by Mr.Marshall to Mr.Fisher for goods returned by Mr.Marshall is to be accounted for

    • A.

      Bill receivable Book

    • B.

      Purchases Return Book

    • C.

      Purchase Book

    • D.

      Journal Proper

    Correct Answer
    B. Purchases Return Book
    Explanation
    The correct answer is Purchases Return Book. A debit note is issued when goods are returned by a customer, indicating a decrease in accounts receivable. In this case, Mr. Marshall issued a debit note for Rs.500 to Mr. Fisher for goods returned. Purchases Return Book is used to record such transactions, specifically for goods returned to the supplier. Therefore, the debit note issued by Mr. Marshall should be accounted for in the Purchases Return Book.

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  • 30. 

    When the goods are returned to a supplier

    • A.

      A Debit note is sent to him

    • B.

      An Account sale is sent to him

    • C.

      A receipt is sent to him

    • D.

      Either (b) or (c)

    Correct Answer
    A. A Debit note is sent to him
    Explanation
    When goods are returned to a supplier, a debit note is sent to him. A debit note is a document that informs the supplier about the return of goods and requests for a credit or refund. It serves as a formal record of the transaction and helps in maintaining accurate accounting records. Sending a debit note ensures that the supplier is aware of the return and can take appropriate action to rectify the transaction.

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  • 31. 

    The weekly or monthly total of the purchase book is

    • A.

      Posted to the Debit of the purchase A/c

    • B.

      Posted to the credit of the purchase A/c

    • C.

      Posted to the credit of the bill payable A/c

    • D.

      None of the above

    Correct Answer
    A. Posted to the Debit of the purchase A/c
    Explanation
    The correct answer is "Posted to the Debit of the purchase A/c" because the purchase book records all the purchases made by a company. When the total of the purchase book is calculated, it represents the total amount of purchases made by the company. Since purchases are considered as an expense, they are posted to the debit side of the purchase account in the company's books of accounts.

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  • 32. 

    Trade discount allowed at the time of sale of goods is

    • A.

      Recorded in Journal

    • B.

      Not recorded on book of accounts

    • C.

      Recorded in Cash book

    • D.

      Recorded in Sales book

    Correct Answer
    B. Not recorded on book of accounts
    Explanation
    Trade discount allowed at the time of sale of goods is not recorded on the book of accounts because it is a reduction in the selling price of goods given to the customer as an incentive or reward for purchasing in bulk or for other reasons. It is not considered as an expense or income and does not affect the financial position of the business. Therefore, it is not necessary to record it in the book of accounts.

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  • 33. 

    Balance of Petty Cash Book is posted to ledger

    • A.

      In the bank a/c

    • B.

      In the cash a/c

    • C.

      No where

    • D.

      Both (a) and (b)

    Correct Answer
    B. In the cash a/c
    Explanation
    When the balance of the Petty Cash Book is posted to the ledger, it is recorded in the cash account. This is because the petty cash fund represents cash on hand, and therefore, the balance is reflected in the cash account in the ledger. By posting the balance to the cash account, the company ensures that the petty cash transactions are properly accounted for and included in the overall cash balance.

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  • 34. 

    Petty Cash is used for payment of

    • A.

      Salaries & wages of the staff

    • B.

      For purchase of assets

    • C.

      Small expenses relating to postages and conveyance etc.

    • D.

      All of the above

    Correct Answer
    C. Small expenses relating to postages and conveyance etc.
    Explanation
    Petty Cash is a small amount of cash that is kept on hand to cover small expenses such as postages and conveyance. It is not used for payment of salaries and wages or for purchasing assets. Therefore, the correct answer is "Small expenses relating to postages and conveyance etc."

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  • 35. 

    When a cheque is returned dishonoured, it is recorded on

    • A.

      Bank column on the debit side

    • B.

      Bank column on the credit side

    • C.

      Cash column on the credit side

    • D.

      None of the above

    Correct Answer
    B. Bank column on the credit side
    Explanation
    When a cheque is returned dishonoured, it means that there are insufficient funds in the account to cover the amount of the cheque. In this case, the bank needs to record this transaction in their books. Since the bank is the one receiving the cheque and it is being returned, it should be recorded in the bank column. Additionally, since the cheque is being returned due to insufficient funds, it should be recorded on the credit side as it represents a decrease in the bank's assets.

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  • 36. 

    Return Inwards books records  _____________       

    • A.

      Purchase returns

    • B.

      Sales returns

    • C.

      Cash Sales returns

    • D.

      Both (a) and (c)

    Correct Answer
    B. Sales returns
    Explanation
    The correct answer is sales returns. Sales returns refer to the goods that are returned by customers due to various reasons such as defects, dissatisfaction, or wrong delivery. These returns are recorded in the Return Inwards books to keep track of the quantity and value of goods returned. The other options, purchase returns and cash sales returns, are not relevant to the recording of return inwards.

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  • 37. 

    Sale or return day book is a

    • A.

      Personal A/c

    • B.

      Suspense A/c

    • C.

      Memorandum A/c

    • D.

      Nominal A/c

    Correct Answer
    D. Nominal A/c
    Explanation
    The given correct answer is Nominal A/c. A nominal account is used to record expenses, losses, incomes, and gains. In the context of a sale or return day book, it is likely that the account is used to record any gains or losses that occur due to sales or returns. This type of account helps in tracking and analyzing the financial performance of a business by categorizing and summarizing various types of revenues and expenses.

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  • 38. 

    X started business with cash Rs.1,00,000 cash and furniture Rs.20,000.He bought goods worth Rs.3,00,000 on credit basis. Sales amount to Rs.5,00,000 including Rs.50,000; cash sales Rs.1,00,000 sales were outstanding at the end of the year. Cash balance after giving affect of above transactions will be

    • A.

      Rs.4,50,000

    • B.

      Rs.3,50,000

    • C.

      Rs.5,00,000

    • D.

      Rs.2,00,000

    Correct Answer
    C. Rs.5,00,000
    Explanation
    The cash balance after giving effect to the transactions mentioned will be Rs.5,00,000. This is because the starting cash balance was Rs.1,00,000, and there were cash sales of Rs.1,00,000. Additionally, the sales included Rs.50,000 of cash sales. Therefore, the total cash inflow is Rs.1,00,000 + Rs.1,00,000 + Rs.50,000 = Rs.2,50,000. On the other hand, the goods bought on credit for Rs.3,00,000 and the outstanding sales of Rs.1,00,000 do not affect the cash balance. Hence, the final cash balance is Rs.2,50,000 + Rs.2,50,000 = Rs.5,00,000.

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  • 39. 

    Cash discount allowed to a debtor should be credited to

    • A.

      Debtor A/c

    • B.

      Purchase A/c

    • C.

      Discount A/c

    • D.

      Sales A/c2

    Correct Answer
    A. Debtor A/c
    Explanation
    When a cash discount is allowed to a debtor, it means that the debtor is being given a reduction in the amount they owe. This reduction should be credited to the Debtor A/c because it represents a decrease in the debtor's liability to the business. By crediting the Debtor A/c, the business is acknowledging that the debtor's outstanding balance has been reduced due to the cash discount. This ensures that the debtor's account accurately reflects the reduced amount they owe to the business.

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