To determine the correct option for recording the cash discount in Saka's books after Alaka settled his debt, let's break down the situation step-by-step. Understanding the Scenario

1. Debt Amount: Alaka owed Saka N15,000.
2. Cash Discount: Alaka received a cash discount of 10% on the amount owed.
3. Settlement: Alaka pays the amount after deducting the cash discount.

Calculating the Cash Discount First, we need to calculate the cash discount:

• Cash Discount = 10% of N15,000
• Cash Discount = 0.10 × N15,000 = N1,500

Now, we can determine how much Alaka actually pays after the discount:

• Amount Paid by Alaka = Total Debt - Cash Discount
• Amount Paid by Alaka = N15,000 - N1,500 = N13,500

Recording the Transaction in Saka's Books When Alaka pays Saka, Saka needs to record the transaction in his accounting books. The cash discount is a reduction in the revenue that Saka would have otherwise recognized from Alaka. Journal Entry To record this transaction, Saka will make the following journal entry:

1. Debit the cash account (or bank account) with the amount received (N13,500).
2. Debit the discount allowed account with the cash discount (N1,500).
3. Credit Alaka's account with the total amount owed (N15,000).

The journal entry can be summarized as follows:

• Debit: Cash/Bank Account N13,500
• Debit: Discount Allowed Account N1,500
• Credit: Alaka's Account N15,000

Analyzing the Options Now, let's analyze the provided options:

• A. Debit Saka's account and credit discount received account: This option is incorrect because Saka is not debiting his own account; he is receiving cash. Additionally, "discount received" is not applicable here since Saka is allowing a discount to Alaka.
• B. Debit Alaka's account and credit discount received account: This option is incorrect because Saka is not debiting Alaka's account; he is crediting it to reflect that Alaka has settled his debt. Also, "discount received" is not the correct terminology in this context.
• C. Debit discount received account and credit Alaka's account: This option is incorrect because Saka is not receiving a discount; he is allowing a discount to Alaka. Therefore, the discount should be recorded as "discount allowed," not "discount received."
• D. Debit discount allowed account and credit Alaka's account: This option is the correct choice. Saka should debit the discount allowed account to reflect the discount given to Alaka and credit Alaka's account to show that the debt has been settled.

Conclusion The correct option is D: Debit discount allowed account and credit Alaka's account. This accurately reflects the transaction where Saka allows a discount to Alaka for settling his debt. Revision Summary

• Alaka owed Saka N15,000 and received a 10% cash discount (N1,500).
• Alaka paid N13,500 after the discount.
• Saka records the transaction by debiting the cash account and the discount allowed account, and crediting Alaka's account.
• The correct journal entry reflects the reduction in revenue due to the discount allowed.