Accounting treatment of cash discounts received

Steps:

• Cash discounts received are reductions granted by suppliers for prompt payment.
• They are entered in the discount received column of the three-column cash book during payment recording.
• The discount amount is then posted to the discount received account in the ledger.
• This account is credited to the trading account as a deduction from gross purchases, reducing expenses without separate income recognition.

Why A is correct:

• Per standard double-entry bookkeeping, cash discounts received appear in the cash book's discount column for cash transactions, but they adjust purchase costs downward rather than acting as income to boost profit directly (as defined in the trading and profit/loss account structure).

Why the others are wrong:

• B: Incorrectly marks cash book recording as false; discounts are noted there.
• C: Falsely denies both; cash book entry is valid.
• D: Identical to C, wrongly rejects cash book recording.

Final answer: A