Question

The account type for Merchandise Discounts should be ______

a. cost of goods sold

b. income

c. expense

d. asset

Answer 1

Merchandise accounts are contra income accounts. This can be tracked by creating a discount item and using it on sales transactions.

Option (c) is correct. The account type for Merchandise Discounts should be Expense.

Option (a) is incorrect. Merchandise discount is not included in cost of goods sold.

Option (b) is incorrect. Merchandise discounts are not income but contra income.

Option (d) is incorrect. Merchandise discounts cannot be asset as it will not generate revenue by encashing them.