Payment for merchandise sold on credit for $250 subject to 1/10, n/30 was received within the discount period-$247.50 was received. This was recorded with a debit to Sales Discounts for $2.50, a debit to Cash for $247.50, and a credit to Accounts Receivable $250, but no mention was made of the subsidiary ledger account. This error will cause:

A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the control account to not agree with the subsidiary ledger.
D) the assets to be overstated.

Question

Ripan Sandhu · Accepted Answer

Final Answer : C, Explanation :  The error in not mentioning the subsidiary ledger account when recording the transaction means that the individual customer's account in the subsidiary ledger will not be updated, leading to a discrepancy between the control account (Accounts Receivable) and the total of the individual accounts in the subsidiary ledger.

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