Question

Q 7.8: why do companies often use the gross method of recording cash discounts if the net method is theoretically more correct?

Answer 1

Using the gross method of recording cash discounts, one will record the transaction at full amount without the discount applied yet. If the customer avails the discount, then another entry will include the discount. This is the more preferred method of recording cash discounts because it allows you to see the details of discounts and monitor the costs that the company has incurred with the discounts.