Journal Entry for Debt Payment with Cash Discount

Steps:

• Calculate discount: 2% of $400 =$8.
• Determine payment amount: $400 -$8 = $392.
• Debit Accounts Payable (Sam) $400 to clear the debt.
• Credit Cash (Bank) $392 for the amount paid.

Why D is correct:

• Matches double-entry rule: Debit payable $400 to remove liability, credit cash$392 for outflow (discount implied as $8 credit to income).

Why the others are wrong:

• A: "Bank allowed 392" reverses roles; bank doesn't allow discount.
• B: "Bank received 392" implies cash inflow, but payment is outflow.
• C: "Bank allowed 392" misplaces discount; bank not involved in allowance.

Final answer: D