Omission of trade discount understates recorded assets

Steps:

• Trade discount amount = 10% × $5000 =$500.
• Correct invoice and recording = net $4500 for debtors and sales.
• Error: Forgot to give discount, so invoice and books show $4500 (discount applied by mistake).
• Result: Debtors (assets) recorded $500 lower than list price receivable of$5000.

Why C is correct:

• Assets understated by $500 because trade discount, per accounting standards, reduces the gross list price to net realizable value before recording; forgetting to "give" it implies unintended deduction, lowering book asset value below actual agreed receivable (definition from double-entry principle for sales on credit).

Why the others are wrong:

• A wrong: No suspense account opened, as initial sales entry balances without discrepancy.
• B wrong: Includes 2 (overstatement) and 4 (understatement duplicate), contradicting net effect of underrecording.
• D wrong: 4 duplicates 3 but implies isolated effect without confirming only assets impacted.

Final answer: C