Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 8 - Valuation of Inventories: A Cost-Basis Approach - Review and Practice - Questions - Page 421: 9


Cash/purchase discounts should not be accounted for as financial income when payments are made. Income should be recognized when the earning process is complete i.e. when the company sells the inventory.

Work Step by Step

Moreover, a company does not earn revenue from purchasing goods. Cash/purchase discounts should be considered as a reduction in the cost of the items bought.
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